Last week, the Oregon Legislature held a Second Special Legislative Session and is contemplating a third September session to discuss disconnecting from the federal Coronavirus Aid, Relief, and Economic Security Act (CARES) Act.
The debate centers on tax breaks for business owners. Advocates for disconnecting argue that these taxes would prevent cuts to education and other vulnerable programs in need of COVID-19 relief. Opponents believe that the CARES Act tax breaks allow business owners the chance to recoup losses and avoid layoffs.
The proposed legislation includes three specific changes that would recoup millions of dollars of otherwise lost state income, including:
Eliminating the limitation on excess business losses
- For S-corporations looking to offset income, the CARES Act eliminated maximum amounts of losses, allowing additional net operation losses to be carried forward. Disconnecting from the CARES Act would restore these limits for state tax returns.
Allowing carryback of net operating losses for up to five years
- The state’s proposed legislation would reestablish an 80% limit on carrying back net operating losses for 2018 and 2019 tax years. The CARES Act currently allows businesses to offset 100% of the taxable income for 2019 and 2020.
Deducting business interest expenses without limitation
- Disconnecting from the CARES Act would allow businesses to deduct a maximum of 30% of the adjusted taxable income for the 2019 and 2020 tax years, rather than the 50% allowed at the federal level.
The Bill was presented during the second special session and lawmakers expect it to be the center of attention for the September session. Experts across Oregon are anticipated to attend and provide testimony on both sides of the argument. While no action is needed at this time, business owners should prepare to consult their business advisor for continued tax planning and advice.
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Meet the Author
Mike Sause, CPA, CCIFP®
Aldrich CPAs + Advisors LLP
Mike Sause joined the firm in 2008 and provides consulting, tax planning and compliance services to businesses and their owners. He has over two decades of public accounting experience in medium sized local and regional firms and specializes in the construction industry. Mike also spent four years in banking and private accounting positions. Oregon Society…
- Certified Public Accountant
- Certified Construction Industry Financial Professional (CCIFP®)
- Strategic tax planning and compliance