(OREGON) — Oregon lawmakers advanced Oregon Senate Bill 1507 on February 16, 2026, voting 17-13 to block the state from automatically adopting three federal tax breaks enacted in H.R. 1.
The measure now moves to the Oregon House for consideration, setting up a new round of debate over whether Oregon should follow federal tax changes or keep its own rules to protect state revenue.
Backers in the Democratic majority framed the bill as a targeted rollback of what they called “Trump tax loopholes,” while Republicans warned it amounts to a tax increase that could make Oregon less competitive for investment and business growth.
The bill centers on Oregon’s links to federal tax law and the budget impact that can follow when Congress changes deductions and business write-offs. Oregon’s tax code often conforms automatically to federal definitions and rules, which can simplify filing but can also swing state revenues quickly when federal policy shifts.
Supporters said automatic conformity with federal tax changes in H.R. 1, passed last year, would drive a projected revenue loss of nearly $900 million over the current biennium. SB 1507 would instead “decouple” Oregon from three provisions, keeping Oregon aligned with pre-H.R. 1 rules in those areas.
One of the three changes would disallow, for Oregon purposes, the federal deduction tied to interest paid on personal vehicle loans. Another would reject the federal treatment for profits from selling “qualified small business stock.”
The third provision would end immediate, bonus depreciation-style treatment in Oregon by requiring businesses to spread deductions for equipment and machinery purchases over several years, rather than taking the faster write-off allowed under the federal change. That decoupling would affect how businesses time deductions for major purchases, even if federal rules still allow faster treatment.
Lawmakers and analysts typically point to several reasons states choose to decouple from federal tax law, including budget stability, policy preferences, and administrative tradeoffs. Automatic conformity can reduce complexity in some areas, while selective decoupling can preserve state revenue or maintain a different policy approach even if it adds layers for some taxpayers.
Supporters of SB 1507 said the budget stakes are immediate because Oregon writes biennium budgets and must account for volatility in revenues and the cost of state programs. They argued that accepting the H.R. 1 provisions automatically would cut too deeply into collections during the 2025–27 planning window.
Passage of SB 1507 is expected to increase state tax collections by $311.6 million in the current 2025-27 budget cycle, compared with what Oregon would collect if it conformed to H.R. 1. Estimates varied across analyses from $291 million to $342 million, depending on what else gets counted alongside the decoupling, including possible expanded low-income credits or job-creation incentives and the way timing and interactions with other business deductions are modeled.
Democrats also tied the debate to program pressures they said Oregon already faces, arguing that the effect of H.R. 1 at the state level goes beyond top-line revenue. Supporters pointed to added administrative costs for programs like Medicaid and SNAP, alongside the loss of revenue they described as $888 million, as part of the case for limiting conformity.
Sen. Anthony Broadman, a Democrat from Bend who chairs Senate Finance and Revenue and sponsored the bill, argued Oregon would not be alone in rejecting the breaks and said the state could maintain competitiveness while keeping more revenue at home. Rep. Nancy Nathanson, a Democrat from Eugene and chair of the House Revenue Committee, also sponsored the measure.
On the Senate floor, Sen. Wlnsvey Campos, a Democrat from Aloha, cast the bill as a defensive move against federal policy choices, saying, “This body must be the backstop against an increasingly hostile federal administration that doesn’t care about raising prices on everyday people to pay for tax cuts for wealthy corporations.”
Republicans countered that the practical effect is higher taxes for Oregon businesses and entrepreneurs, and they argued it could ripple through hiring and investment. Senate Minority Leader Bruce Starr, a Republican from Dundee, pointed to the fiscal framing of the proposal and said, “The revenue statement clearly says this is a tax increase on Oregonians.”
Sen. David Brock Smith, a Republican from Port Orford, pushed back on Democratic claims that the change targets only large corporations, saying, “These are small businesses in Oregon. it’s just not the evil big corporations.” Sen. Mike McLane, a Republican from Powell Butte, argued decoupling itself carries a cost and said, “To disconnect is to raise taxes on Oregonians and this economy.”
Republicans also attempted to change the bill on the floor, offering a GOP amendment designed to retain the federal breaks while expanding low-income credits. That amendment failed 18-12, sharpening the partisan split over whether lawmakers should preserve the federal tax benefits and add offsets, or reject the breaks outright to protect state revenue.
The final passage vote also showed a small break within the Democratic caucus. Sen. Mark Meek of Gladstone voted against the bill with Republicans, according to the vote tally cited by backers and opponents during the debate.
Business groups and Republicans warned that Oregon could lose ground against other states if it declines to follow federal treatment for investment, equipment purchases, and certain stock-related gains, while Democrats said the effects on Oregon’s economy would be minimal. Broadman argued Oregon’s approach would match decisions in other states, and Democrats stressed they were not raising tax rates but returning to prior rules.
The fight comes as states around the country weigh what to do with the federal changes in H.R. 1 and how those changes interact with state budgets and tax policy choices. For Oregon, SB 1507 would draw a clear line on three items—auto loan interest, qualified small business stock profits, and bonus depreciation—without attempting a broader rewrite of the tax code.
Oregon lawmakers now turn to the next stage of the bill’s path, with SB 1507 heading to the House. House members could adopt the Senate version, amend it, or send a different proposal back for a conference process if the chambers diverge.
As of February 16, 2026, no House action or gubernatorial position is reported, leaving the outcome dependent on House deliberations and whether legislative leaders seek changes to the bill’s scope, revenue assumptions, or any accompanying credits before sending it to Gov. Tina Kotek’s desk.
Oregon Senate Bill 1507 Pushes Back Against H.R. 1 Bonus Depreciation
Oregon lawmakers have advanced Senate Bill 1507 to prevent the state from automatically adopting three federal tax breaks. The bill targets provisions regarding vehicle loan interest, small business stock, and equipment depreciation. While Democrats frame the move as a necessary step to protect $900 million in state revenue, Republicans condemn it as a tax increase that could drive away investment and hurt Oregon’s economic competitiveness.
