What is Happening
The Oregon legislative session continues at a slow pace with the House and Senate only convening once a week for floor sessions – the House on Tuesdays and Senate on Thursdays.
Policy committees, however, have been busy with numerous hearings on low-profile policy bills over the last week and more scheduled this week. Committees are doing all of their work remotely over Microsoft Teams, which has really changed the nature and pace of committee hearings.
We anticipate a large number of public hearings to continue and then work sessions scheduled as we get closer to March in anticipation of more regular floor sessions in both chambers.
The Oregonian reported last week that the state could face a $1.6 billion shortfall for the upcoming 2021-23 biennium. This will largely be felt in the health care/Oregon Health Plan as there is not the revenue to cover the growth in Medicaid recipients.
Activity on Major Issues
The Senate Finance & Revenue Committee held its first hearing on a major tax bill this past week as it considered amendments to Senate Bill 137 which would disconnect Oregon business taxpayers from several provisions of the Federal CARES Act including (1) the increase in the ‘Business Loss Limitation’, (2) the carry back of ‘Net Operating Loss’ for five years, and (3) the increase of deductible business interest expense from 30% to 50% of taxable business income.
SB 137 would inhibit businesses to create liquidity and cash flow which was a major economic relief tool that was included in the CARES Act in the midst of a recession. Oregon legislature’s push to deprive Oregon businesses of needed tax relief – even tax relief to help businesses struggling in a pandemic – adds to the mounting pressure that has been placed on businesses ability to operate, stemming from our local government.
SB 137 with the -1 Amendment would deny Oregon businesses $84 million in tax relief retroactively and another $32 million in tax relief in the upcoming biennium – a total tax increase of $116 million.
What to Watch For
Temporary waiver of Enterprise Zone eligibility requirements (HB 2343): On Monday, the House Business and Labor Committee will hold a public hearing on HB 2343, which would allow local governments to temporarily suspend Enterprise Zone employment requirements where employers can demonstrate to the zone sponsor that workforce curtailments are a result of the COVID-19 crisis and related economic impacts. This pro economic development bill would allow local governments to work with those companies who drop below the employment thresholds to maintain existing abatements and avoid further threats to the workforce, their businesses and their operations. Visit the Committee page if you’re interested in engaging on this bill.
Transient Lodging Taxes (HB 2500): On Tuesday, the House Revenue Committee will hold a hearing on HB 2500 that would permanently increase the state transient lodging tax from 1.5% to 1.8%. The state TLT is currently 1.5% after the temporary, four-year 1.8% tax rate expired on July 1, 2020. The TLT is used to fund tourism promotion across Oregon. Visit the Committee page if you want to engage on this bill.
We are getting concerned about the surprising number of legislative discussions on creating new state tax liabilities from the federal Paycheck Protection Program.
For starters, House Bill 2253 proposes a surcharge on forgiven PPP loans.
But even more recently, the Senate Finance & Revenue Committee has held discussions about disallowing the deduction of payroll and other expenses covered by the PPP on Oregon tax returns. This would be in stark contrast with recent federal legislation which allows full deduction of payroll and other items covered by PPP loans.