QSBS in Oregon: SB 1507 Decoupled Section 1202 — What Portland and Oregon Founders Need to Know in 2026

What SB 1507 changed: full decoupling from Section 1202

Before April 2026, Oregon conformed to the federal Internal Revenue Code on a rolling basis — changes to the federal tax code, including IRC §1202, were automatically adopted by Oregon without requiring separate state legislation. Oregon founders could exclude QSBS gains federally and the same exclusion flowed through to their Oregon income tax return.

Senate Bill 1507 ended that. SB 1507 explicitly decouples Oregon from the §1202 exclusion, requiring Oregon residents to add back any §1202 gain exclusion to their Oregon taxable income.¹ The decoupling applies retroactively to sales occurring on or after January 1, 2026 — meaning founders who sold QSBS before the bill was even signed may owe Oregon state tax on the excluded gain when they file their 2026 Oregon return.

The legislative debate was contentious. The Portland startup community and technology advocacy groups opposed the bill, arguing it would push founders and early-stage companies toward states with more favorable exit tax treatment.² Governor Kotek acknowledged those concerns in her signing letter and committed to working with her Prosperity Council to propose corrective QSBS legislation in the 2027 session.³ But the law is effective now, and the 2027 fix remains speculative.

Oregon's prior conformity — and why it mattered

Oregon historically followed the federal §1202 treatment without reservation. When Congress passed the 100% exclusion in 2010, Oregon founders automatically received it at the state level. When the One Big Beautiful Bill Act (OBBBA) raised the exclusion cap to $15 million and introduced tiered 3/4/5-year exclusions in July 2025, Oregon's rolling conformity would have applied those benefits at the state level — except SB 1507 decoupled Oregon before Oregon founders had completed any post-OBBBA exits.

The practical effect: for Oregon founders, the OBBBA's significant improvements to Section 1202 — the larger $15 million cap, the tiered holding periods that allow partial exclusions starting at 3 years, the $75 million gross assets threshold — deliver no Oregon tax benefit. Every dollar excluded federally remains fully taxable in Oregon.

Oregon income tax rates in 2026

Oregon taxes all income, including capital gains, as ordinary income. There is no preferential rate for long-term capital gains.⁴ Oregon's 2026 personal income tax brackets for single filers are:

For married filing jointly, the same rates apply with doubled income thresholds: 4.75% to $8,100; 6.75% to $20,400; 8.75% to $250,000; 9.9% above $250,000. A founder with substantial QSBS gain will see nearly all of it taxed at 9.9% once the lower brackets are exhausted.

Portland-area surcharges: Multnomah County PFA and Metro SHS

Portland-area founders face additional income taxes on top of the Oregon state rate that do not apply to founders in Eugene, Bend, Salem, or other Oregon cities outside the Metro district.

Multnomah County Preschool for All (PFA): 1.5% on county taxable income over $125,000 for single filers ($200,000 MFJ), plus an additional 1.5% (3% total) on county taxable income over $250,000 for single filers ($400,000 MFJ). Capital gains are included in county taxable income.⁴

Metro Supportive Housing Services (SHS): 1% on Metro district taxable income over $128,000 for single filers ($205,000 MFJ) in 2026. The threshold is inflation-adjusted starting in 2026. Capital gains are included.⁴

Combined, the Portland-area stack on income above $250,000 reaches: 9.9% (Oregon) + 3% (Multnomah PFA) + 1% (Metro SHS) = 13.9% — higher than California's 13.3% top rate on large QSBS exits.

Worked examples: the tax cost of SB 1507

State comparison: how Oregon now ranks for QSBS

The decoupling moved Oregon from a conforming state to a non-conforming state, joining California, Pennsylvania, Alabama, and Mississippi.

See the QSBS State Conformity overview for the full list of non-conforming states and how to read each state's rules.

The referendum track and the 2027 legislative window

Oregon founders have two potential paths back to conformity — neither is certain, and neither should be used as a substitute for current-law planning.

Referendum challenge (90-day window)

Under Oregon law, opponents of a signed bill can gather signatures to refer the measure to voters. If they collect enough valid signatures within 90 days of the bill becoming law, the measure is suspended pending a statewide election — and if voters reject the referred measure, the law is repealed retroactively.²

Republican lawmakers announced a referendum effort targeting SB 1507 shortly after the governor signed it. The 90-day signature window runs from April 9, 2026. If the referendum qualifies for the ballot, SB 1507 would be suspended while the election proceeds — meaning 2026 QSBS sales might not be taxable in Oregon at all, depending on the election outcome. If voters uphold the bill, the decoupling becomes final and the 2027 Prosperity Council track becomes the primary path to any fix.

Governor Kotek's 2027 Prosperity Council commitment

Governor Kotek's signing letter included a commitment to direct the Oregon Prosperity Council to develop corrective QSBS legislation for the 2027 session.³ What form that legislation takes — full conformity, targeted conformity for resident founders, a smaller exclusion cap, or an alternative startup incentive — is unknown. Legislative proposals from 2027 cannot affect 2026 tax liability unless passed with retroactive effect, which is politically and legally more complex.

For founders with a 2026 exit already closed or in progress: current law applies to 2026 returns. Plan accordingly. For founders with exits in 2027 or later: the landscape may look different, but planning around uncertain future legislation is high-risk.

Planning options for Oregon QSBS holders

The planning menu for Oregon founders is similar to California, with one meaningful difference: the potential for the law to be suspended or repealed adds a short-term uncertainty layer that California's long-standing non-conformity does not have. The core strategies:

1. Residency change before the transaction

Oregon's tax applies based on your residency at the time of the sale. If you are not an Oregon resident when the QSBS sale closes, Oregon generally cannot tax the gain — provided the stock is not Oregon-source income based on prior service performed in Oregon, and provided you have genuinely established domicile in another state.

Residency for Oregon income tax purposes is domicile-based, not purely a day-count.⁴ The Oregon Department of Revenue (ODR) considers factors including where you maintain your permanent home, where your family is located, where you are registered to vote, and where you spend most of your time. A move that is completed the month before a known exit is likely to draw ODR scrutiny — especially for high-dollar QSBS sales that would generate significant Oregon revenue.

The most defensible domicile changes are ones made well in advance of any specific transaction, with documented severing of Oregon ties: cancellation of Oregon driver's license and vehicle registrations, registration in the new state, new banking relationships, changed employer address, and genuine time spent in the new state. No-income-tax states like Texas, Florida, Nevada, and Washington are common destinations. States with conforming QSBS treatment (Colorado, New York, Illinois) still charge state income tax but at lower rates than Oregon's 9.9%.

2. Charitable giving of QSBS shares before the transaction

Donating appreciated QSBS shares directly to a Donor Advised Fund (DAF) or a Charitable Remainder Trust (CRT) before a binding sale agreement can eliminate the Oregon capital gains tax on the donated shares, because charities are exempt from Oregon income tax. The donor also receives a federal charitable deduction for the fair market value of the donated shares.

For philanthropic founders, a DAF contribution combined with the §1202 exclusion on the retained shares can produce very low total tax on a large exit. The anticipated assignment-of-income doctrine applies: the donation must occur before a legally binding commitment to sell exists. "Under contract" is already too late. See the QSBS Charitable Planning guide for the mechanics and deduction limits.

3. Gifting shares to non-Oregon family members

Federal §1202(h)(2)(A) allows donee transferees to hold QSBS and benefit from the exclusion — the donee inherits the donor's holding period and basis for §1202 purposes. If family members (spouses, adult children, parents) are not Oregon residents, gifting QSBS shares to them before a sale can shift some of the taxable gain to a jurisdiction that conforms to §1202 or has no income tax.

This does not reduce the Oregon tax on shares retained by the Oregon-resident donor. It is most effective when a portion of the family genuinely lives outside Oregon in a conforming or no-tax state. See the Gifting and Stacking guide for how the stacking math works across family members.

4. Non-grantor trust in a conforming state

A non-grantor incomplete-gift trust (NING or similar structure) domiciled in Nevada, Wyoming, or another state with no income tax could, in theory, hold appreciated QSBS outside Oregon's taxing reach — if structured correctly and administered genuinely in the trust situs state. These structures are complex, require experienced trust and tax counsel, and must be established well before any transaction. Oregon may assert that a trust is subject to Oregon taxation if it has Oregon-resident beneficiaries or fiduciaries with dispositive powers.

See the QSBS and Trusts guide for how grantor and non-grantor trust structures interact with §1202.

5. What doesn't reduce the Oregon bill

• Section 1045 rollover: Deferring gain by rolling into new QSBS within 60 days postpones Oregon taxation but does not eliminate it — Oregon taxes the gain when the replacement stock is eventually sold.
• Installment sale: Spreading proceeds over multiple years spreads the Oregon tax over multiple years at the same 9.9% rate. It doesn't reduce the total Oregon liability.
• Federal exclusion mechanics: Holding the stock longer, choosing the right exclusion tier, or having a lower basis all affect the federal tax. None of that affects Oregon's SB 1507 add-back, which applies to whatever gain is excluded federally.
• Waiting: The 2027 legislative window and referendum uncertainty do not help with 2026 exits that have already closed. Those returns will reflect the SB 1507 add-back unless the referendum suspends and then repeals the law.

What Oregon founders should do now

If you hold QSBS and are an Oregon resident with a liquidity event on the horizon:

1. Model your Oregon exposure. Run the full tax math — Oregon state, Multnomah/Metro if applicable, federal NIIT, and AMT — before any deal terms are finalized. The number will be material.
2. Identify the planning window. Most strategies require action before a binding LOI or term sheet. Residency change requires even more lead time. Know when your window closes.
3. Don't rely on referendum outcomes. Planning around uncertain future law is speculation. Plan for current law and treat any change as upside.
4. Get a QSBS-specialist advisor before the deal. Oregon's decoupling is new. General CPAs and financial planners may not be up to speed on the SB 1507 mechanics, the referendum interaction, or the trust and gifting strategies that remain available.

A fee-only advisor who works with startup liquidity events can model your Oregon exposure, coordinate residency and charitable planning with your attorney and CPA, and help you build a complete post-exit plan before any irreversible decision is made.