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Oregon officials propose accounting fix to blunt IRS payroll‑tax ruling for paid leave
Summary
Oregon’s economic-development and paid‑leave officials told the House labor committee that a recent IRS ruling treating employer‑funded portions of paid medical leave as wages could create substantial payroll‑tax costs unless Oregon adopts an accounting method to segregate employer and employee contributions. The agencies requested a small statutory change in the 2026 short session to pursue that approach.
Oregon officials told the House Interim Committee on Labor and Workforce Development on Nov. 18 that a recent IRS revenue ruling changing federal tax treatment of state paid‑leave benefits will require changes to how Paid Leave Oregon reports and funds benefits.
Andrew Stolphy, director of the Oregon Employment Department, and Juan Serratos, acting director of Paid Leave Oregon, said the IRS ruling treats any portion of medical‑leave benefits funded by employer contributions as wages for federal payroll‑tax purposes and requires reporting on Form W‑2 rather than Form 1099‑MISC.
“Employers could owe taxes on benefits they did not issue,” Serratos said, warning that claimants could receive lower take‑home benefits and that, if the…
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