Oregon Code § 316.856·Enacted ·Last updated March 01, 2026
Statute Text
Severance pay; rules.
(1) As used in this section:
(a) Invest
means to exchange cash for equity, debt, convertible debt or management
responsibilities, accompanied by terms that substantiate ownership or control
of an interest in a business. Invest does not mean to make a loan to a
business.
(b) Material
participation has the meaning given that term in section 469 of the Internal
Revenue Code.
(c) Severance
pay means funds paid to an employee upon termination of employment, other than
back wages, vacation pay or sick pay.
(d) Small
business has the meaning given that term in ORS 183.310.
(2) There shall
be subtracted from federal taxable income an amount equal to severance pay that
a taxpayer receives during the tax year and invests in a new or existing small
business in this state if:
(a) The
investment occurs on or before the due date for the return for the tax year or
the expiration of the extension period for filing that return, if any;
(b) The
investment continues for at least 24 months following termination of
employment;
(c) The taxpayer
materially participates in the small business;
(d) The taxpayer
has not previously claimed a subtraction under this section; and
(e) The small
business is not the employer that paid the severance pay and does not have any
owner in common with the employer that paid the severance pay.
(3) The
subtraction under this section may not exceed the lesser of:
(a) The minimum
balance of principal that remains invested by the taxpayer in the small
business at the close of any month during the 24 months following termination
of employment; or
(b) $500,000.
(4) If at any
time the Department of Revenue determines that a taxpayer is not in compliance
with any of the provisions of this section, the department shall disallow the
subtraction under this section. Upon this disallowance, the department shall
determine the amount of tax due absent the subtraction under this section and
immediately shall collect any taxes due by reason of the disallowance.
(5) The
Department of Revenue shall establish by rule procedures for administering this
section, including procedures for verifying the receipt of severance pay by the
taxpayer. [2010 c.66 §2]