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The Legislative Revenue Office found that about 9,000 Oregon sole proprietorships would be eligible for the rate.

JAIME VALDEZ/PORTLAND TRIBUNE - The Oregon Legislature will meet in special session May 21 to consider tax breaks for sole proprietorships.SALEM — The Oregon Legislature will meet May 21 for a special session on business taxes.

Oregon Gov. Kate Brown said Tuesday she wants legislators to meet that day to resolve an "obvious inequity in Oregon's tax system" by expanding eligibility for a state tax break to owners of sole proprietorships.

Current Oregon law holds that some owners of certain types of pass-through businesses — whose business income "passes through" to their personal income taxes — can take a lower tax rate.

Sole proprietorships can't take the lower rate under current law.

The Legislative Revenue Office found that about 9,000 Oregon sole proprietorships would be eligible for the rate if lawmakers tweaked the law, initially passed as part of a 2013 legislative package, to include them.

Oregon largely connects to the federal tax code.

During the short legislative session, lawmakers passed Senate Bill 1528, which disconnected Oregon from part of the recent federal tax overhaul — specifically, a 20 percent deduction from qualifying business income for pass-through businesses. Brown signed the bill.

Allowing that deduction on the state level would have benefited more business owners than the governor's proposal, critics of the disconnect bill argue.

"This so-called 'emergency' was caused by the Governor and the majority party," said Senate Republican Leader Jackie Winters, of Salem, in a prepared statement Tuesday. "Their actions during the 2018 session to take away a small business tax cut is the reason we are now being called in to a special session."

However, Winters added that "we are committed to working to expand these tax cuts so that all small businesses in Oregon receive tax equity and fairness, just as they would have had the governor vetoed Senate Bill 1528."

Proponents of the disconnect say that allowing the deduction would have suddenly deprived the state of hundreds of millions of dollars in revenues for state services and thrown the state budget for a loop.

Observers have said lawmakers will need to stay focused on the task at hand to be successful, a point that political leaders echoed Tuesday.

"Special sessions present unique challenges," said Senate President Peter Courtney, D-Salem. "They require focus. They require discipline."

House Republican Leader Mike McLane, of Powell Butte, was more blunt.

"The political theater session now has a date," McLane said. "Let's hope Gov. Brown and legislative Democrats will limit the scope of the session to the stated purpose instead of allowing for the introduction of unrelated policy bills. In the end, the tone and tenor of the session will be defined by whether Democrats are able to stick to their word."

May 21 falls on a Monday of a week that legislators will already be at the Capitol for a series of interim committee meetings.

Speaker of the House Tina Kotek, D-Portland, said Tuesday that she and Courtney intended to convene a bicameral committee before the session to hear proposed legislation.

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