2018 State Legislative Update
2018 Legislative Report – Week 2 This update is provided through our membership with the Oregon State Chamber of Commerce (OSCC) We are now one week into the 2018 session…four weeks to go. In OSCC’s view, there were four major developments in the early going: The opponents of ‘Cap & Trade’, including OSCC, performed very well during the marathon public hearings on Wednesday. Not only was the quality of the testimony outstanding (including several OSCC members), but opponents matched the proponents in quantity of testimony during the five hours of hearings. Our belief is that any momentum for ‘Cap & Trade’ legislation that had accumulated in the early days of the session was severely blunted. The Senate Finance & Revenue Committee acted swiftly and decisively to effectively repeal Oregon’s small business tax cut, which has only been in effect for three years. Under current law, the state taxes the first $5 million pass through business income at lower rates. But Senate Bill 1528 limits the tax cut to only the first $250,000 of pass through income. Democrats passed SB 1528 on a 3-2 party line vote in committee. The bill is expected to hit the Senate floor for a vote by mid-week. This will be the first major partisan battle of the 2018 session. Of the 225 policy bills that were introduced in the 2018 session, only about 30 were killed with the first deadline of the session. This is a staggeringly low number. This means that about 85% of all the bills are still in play with less than three weeks of committee time left. It’s turning into a nightmare for legislators and advocacy groups alike as they are chasing potential legislation all over the capitol with overlapping committee hearings that require legislators and lobbyists to be in two or more places at once! Of the bills that are now killed, OSCC is not pleased that House Bill 4021, which would have given our manufacturing members further ability to comply with new BOLI work week restrictions, was not even afforded a public hearing. On the flip side, OSCC is pleased to see that House Bill 4105 will not advance, which would have penalized businesses for not offering health benefits to employees who work 30 or more hours per week. What we are looking for in the coming week: There will likely be a significant battle on the Senate floor over SB 1528, which dramatically raises taxes on small pass-through businesses by (1) not extending the federal pass through tax benefits to Oregon small businesses, and (2) drastically cutting back the Oregon ‘Small Business Tax Cut’ from the first $5 million in business income to the first $250k in business income. Pass through businesses are hit hard with this legislation, and it will be hotly contested this week as a vote approaches. We are looking forward to hearings on the ‘Cleaner Air Oregon’ program and the fee bills – HB 4002 and SB 1508 – that are associated with the program. OSCC and industry groups in general will oppose the fee bills, which raise $2 million in Title V or ACDP fees to fund the ‘Cleaner Air Oregon’ toxics program. As an aside, industry is working on a compromise bill – SB 1541 – which may modify the stringent rules to allow business to better comply. But negotiations are uncertain on this bill right now, and time is drawing short. The revenue forecast will be unveiled on February 16th. This is the seminal point in the February session as all budget decisions will be made based on whether the state economist predicts available state revenues. Increased revenues will weaken the case for the legislature to scale back the ‘Small Business Tax Cut’ as it just did in SB 1528. We anticipate that both the House and Senate Environment Committees will send their respective ‘Cap & Trade’ bills to the Ways & Means Committee. Other issues of note: Environmental Regulation: Diesel engine and commercial truck idling regulations are also being discussed with HB 4003. The bill requires DEQ to adopt new emissions standards for medium and heavy duty on-road diesel engines as well as off-road diesel engines. Employment Regulation: With bill that helps address OSCC’s concerns about the new overtime regulations (HB 4021) being one of the few bills that were actually killed in the first week, there are no bills of consequence that deal with employment regulation. For OSCC members that store customer information, there is a significant push for data breach regulation in the wake of the Equifax data breach. The legislation in question – SB 1551 and HB 4147 – would add additional regulations on businesses that store consumer data. OSCC was watching HB 4105, which would levy penalties on employers who do not offer health insurance for any employee who works an average of 30 hours per week. This bill was also one of the few that actually died. Affordable Workforce Housing: House Bill 4007 is the bill to watch here. It proposes to raise document recording fees to put more money into first time homebuyer incentives and incentives for affordable and workforce housing projects. The sticking point is whether to raise the fee to $60 or $75. There appears to be a potential bipartisan consensus around raising the fee from $20 to $60, but at this point the House leadership seems intent on pushing the fee to $75, for which there are no Republican votes. This bill is probably the only real hope to advance any affordable housing progress this session. Fiscal Reform: The Governor’s primary PERS push is going to be a bill which creates PERS ‘side accounts’ to help school districts be able to pre-pay their PERS liabilities. The bill is Senate Bill 1566. It is unknown at this point exactly where all the funding will come from to fund the side accounts in a meaningful way. Overall, it is a very modest proposal that could help ease the PERS crunch on school budgets on the margins. We expect SB 1566 to advance with bipartisan support in the Senate. Taxes: We advised members last week that there are two big issues here – (1) connection to the new federal tax cuts, and (2) the viability of the Oregon Small Business Tax Cut which taxes pass-through income at lower rates. OSCC members that are C corporations will be paying attention to whether the legislature opts to ‘connect’ or ‘disconnect’ from the new federal provisions that allow for 100% upfront depreciation on capital expenditures between 2018-2022. It appears at this stage that the legislature will choose to ‘connect’ to this portion of the new federal law. This is the good news. OSCC members that are pass-through businesses will be paying attention to whether the legislature opts to ‘connect’ or ‘disconnect’ from new federal provisions that allow for an upfront 20% income deduction for pass-through shareholders. It appears at this stage that the legislation will ‘disconnect’ from this portion of the new federal law. This is the disappointing news. As always, OSCC will keep members apprised of any developments on these issues or other emerging issues as the 35-day session moves forward. There may be additional opportunity for member input, particularly on ‘Cap & Trade,’ ‘Cleaner Air Oregon,’ and the critical tax issues being debated.