Summary. Governor Kotek signed SB 1507 on April 9, 2026. Oregon is now decoupled from the federal QSBS exclusion, retroactive to January 1, 2026. Two parallel tracks could still change the outcome: a Republican-led referendum effort that could send the bill to voters before it takes full effect, and Kotek's own signing-letter commitment to propose corrective QSBS legislation in the 2027 session through her Prosperity Council.
Governor Kotek signed SB 1507 on April 9, 2026. Oregon is now decoupled from the federal QSBS exclusion under Section 1202, retroactive to January 1, 2026. Oregon residents who sold qualified small business stock earlier this year are looking at state tax on gain that was fully excluded federally.
That is the headline, and it is bad news for Oregon founders and early investors.
The less-obvious story is in the signing letter — and the less-obvious variable is the referendum campaign already underway.
What the signing letter actually says
Signing letters are usually boilerplate. This one wasn't. Kotek specifically named Section 168(k) bonus depreciation and, more notably, the QSBS exemption — and said those disconnects "could affect Oregon's economic competitiveness." She acknowledged the impact on startups and small businesses and said she takes those effects seriously.
Then she made a commitment. She said she would work with her Prosperity Council to propose legislation for the 2027 session that would address the QSBS exemption issue specifically, along with other pathways to increase business investment in Oregon.
A signing letter is not law. A commitment to propose legislation is not a commitment that legislation will pass. None of this changes what Oregon residents owe on QSBS sales closing today. But this is more specificity than you typically see in a signing letter — a named policy (QSBS), a named vehicle (Prosperity Council), and a named timeline (the 2027 session).
Why the signing letter matters anyway
Three reasons it's worth tracking.
First, it surfaces the political disagreement inside the majority coalition. SB 1507 was framed by its sponsors primarily as a response to the federal One Big Beautiful Bill Act — stopping Oregon from automatically absorbing provisions written in Washington, D.C. The QSBS exclusion doesn't fit that framing cleanly. Section 1202 has been federal law since 1993. Kotek's letter implicitly acknowledges that QSBS got caught up in a decoupling bill that was aimed at something else, and that the collateral damage to Oregon startups wasn't the intended target.
Second, it creates a recognized policy channel. "The Prosperity Council will look at this in 2027" is not a vague promise. It names the body that will do the work and the session in which it will be introduced. If a fix comes through the legislature, it probably comes through that channel. Founders, investors, and advocacy groups who want to engage know where to go.
Third, it opens the question of whether a 2027 fix could be retroactive. Nothing in the signing letter promises retroactivity, and most state tax corrections are prospective. But Oregon has enacted retroactive tax changes before — SB 1507 itself is retroactive — and the case for retroactive relief on QSBS is stronger than average because the disconnect hits a narrow population of identifiable taxpayers on identifiable transactions. Don't plan on retroactive relief. But don't rule it out.
The other live variable: the referendum
Running in parallel to the Prosperity Council track is a referendum campaign led by Rep. Ed Diehl (R-Scio) to refer SB 1507 to Oregon voters. Under Oregon law, petitioners have 90 days from sine die adjournment of the regular session to gather the signatures required to qualify a referendum for the ballot. Diehl previously led a successful referendum campaign against a 2025 transportation tax package, so the capacity is there.
If the referendum qualifies, SB 1507 would be suspended pending the election outcome. If voters reject the bill, the QSBS decoupling goes away entirely and the Prosperity Council fix becomes moot. If voters uphold it, the planning picture reverts to current law and attention shifts to the 2027 legislative session.
Two things to keep in mind. One, the signature-gathering window is tight, and past Oregon tax referenda have a mixed qualification record. Two, even if the referendum qualifies, an election outcome is not a guaranteed repeal — QSBS is a technical tax provision and the "ballot argument" on either side will depend on framing.
The practical implication: for Oregon residents with QSBS sales that can be timed, the question over the next 90 days is not "will the law be fixed" but "when will we know whether the law will be fixed." If the referendum qualifies, we know more by late 2026. If it doesn't, the next meaningful date is the 2027 session.
What this changes for Oregon founders right now
Honestly, not much. The planning posture for 2026 sales is the same as it was a week ago:
- If you have already closed a QSBS sale as an Oregon resident in 2026, you owe Oregon tax on the gain that was excluded federally under current law. Neither the signing letter nor the referendum changes your current filing position.
- If you have a QSBS sale coming up and you can move the timing, the calendar questions are: does the referendum qualify (late-2026 signal), does it pass (November 2026 election if it qualifies), and if neither, does a 2027 legislative fix pass. For founders with multi-year flexibility, the expected-value math is meaningfully different than it was a week ago.
- If you are considering a domicile change before a sale, that analysis hasn't changed. Residency at the time of sale controls, and a genuine domicile change done well in advance of the transaction remains the most reliable planning tool. See Oregon SB 1507 for the residency mechanics.
What to watch
- Referendum signature-gathering progress through summer 2026. The 90-day window from sine die closes in early-to-mid summer. Either petitioners qualify or they don't, and we'll know one way or the other before Labor Day.
- Prosperity Council membership and meeting cadence through fall 2026. Who is on it tells you how seriously business-investment concerns are being weighted.
- Pre-session bill requests in late 2026. QSBS fix bills will likely be pre-filed with LRO concepts in November or December.
- Companion efforts on bonus depreciation, which was the other named item in the signing letter and is a natural pairing in any corrective bill.
- Whether any fix is prospective only or includes retroactivity. If retroactivity is on the table, 2026 Oregon QSBS sales may want to keep their filing positions flexible.
Bottom line
SB 1507 is law, and Oregon QSBS exits are state-taxable for Oregon residents under current law. That is the planning reality today.
But there are now two distinct paths that could change that picture: a referendum that could send the bill to voters, and a Governor-level commitment to propose corrective legislation in 2027. Those paths aren't mutually exclusive, and they run on different clocks. Neither is reason to assume the law will go away — but both are worth tracking, and for founders with timing flexibility on exits, they meaningfully affect the expected-value calculation.
If you want to talk through how any of this affects your specific situation, book a consultation.
Last reviewed: April 17, 2026. This article is for general educational purposes only and does not constitute legal or tax advice.
