You know those times where you accidentally do the wrong thing and then — upon realizing your mistake — work to begin repairing that mistake…? And then you realize that it’s going to take exponentially more effort and heartache than if you’d just simply done nothing…? Welcome to the ongoing conversation around Qualified Small Business Stock taxation in Oregon.
To catch you up, here’s where we started: No tax on QSBS because Oregon tax law was pinned to Federal tax law. Then Oregon SB 1507 happened. Let me talk you through it:
Oopie. There’s that mistake we’re going to regret. And that’s going to create a practically insurmountable amount of additional work to rectify.
Then Governor Tina Kotek specifically said she would work to correct the issue. But of course that was dependent on her being re-elected as governor in November. When she signed SB 1507 back in April, she said something in the signing letter that mattered then and matters now:
But Senate Bill 1507 could affect Oregon’s economic competitiveness, specifically disconnecting from Section 168(k), commonly referred to as M&E bonus depreciation, and disconnecting from the Qualified Small Business Stock (QSBS) exemption. These changes have unique impact on small businesses and start-ups companies. I take these potential effects seriously… I will work with the members of my Prosperity Council to help propose legislation for the 2027 session that would address the QSBS exemption issue specifically, as well as any other pathways toward sustained and increased investment in Oregon.
As if they needed more criticism, folks took the opportunity to inform the Oregon Governor’s Prosperity Council about the issue. And to ask them to rectify it. Which, they did as best they could. Given that they were just a council tasked with coming up with ideas to improve Oregon’s prosperity. Or, you know, undo things that could have a negative effect on Oregon prosperity.
Again, happy to talk you through it.
Now, our friends at the Portland Business Journal have taken the opportunity to talk to a bunch of founders to get their take on the issue. And hopefully inspire more electeds to take this whole thing seriously.
Heather Watkins, cofounder and CRO of Bold Reuse, put it about as plainly as it can be put. “From a competition perspective, Oregon and Portland are in a bad place now and need as much innovation and startup creation and opportunity as possible to create wealth for the community and to pay for programs and have a burgeoning economy,” she said. “We’re kneecapping ourselves for future opportunity. Why would we disincentivize investors in Oregon?”
And then the part that actually got me. Because it’s not the VC angle everyone assumes this is about.
“All our employees could be benefiting from QSBS,” she said. “We would like them to have the same opportunity as they would in other states.”
That’s the thing that keeps getting lost. This isn’t a “rich get richer” type thing. It’s a “risks deserve rewards” type thing.
Dexter Turner, founder and CEO of OpConnect, said it about as directly as you can. “I didn’t start my company by going out and raising money from wealthy investors,” he said. “QSBS was a way to achieve some generational wealth and have some funds I could leave my kids, and I tried to be inclusive and give stock to my employees as performance bonuses with a personal mission of OpConnect having a diverse workforce.”
As the Oregon Entrepreneurs Network framed it, QSBS is “the government’s way of encouraging regular people to found or make an investment in small businesses or innovative startups that are not able to obtain more traditional financing from lenders.”
Regular people. Employees. Founders leaving something to their kids. That’s who this mistake is impacting.
So where does that leave us currently…? Hopeful? Better than it looks, maybe? Six months ago this was a done deal nobody had heard of. Now it’s a live debate. The founders have a microphone. The opposition’s case is out in daylight where it can actually be argued with instead of assumed. And the Governor has put her name to a fix for the 2027 session.
None of that is a win. But all of it presents an opportunity. Which we couldn’t say in March.
Now, we need to look toward the 2027 legislative session — and it’s a long session — where a signing-letter promise either becomes a bill or quietly becomes a document that ages in interesting ways. Kotek’s commitment is on the record.
Now, it’s our job to make sure it happens. And never happens again. It’s not the tax code. I honestly do not care about the tax code. I care about our people. Entrepreneurs. Startup founders. Building here. Betting on Oregon.
Even when Oregon keeps giving them reasons not to.
Again, I’ll keep tracking on this. So you don’t have to. You’ve got enough on your plate.
For more, read “Oregon founders pin hopes on Kotek to reinstate tax break” in the Portland Business Journal.
