The Oregon Department of Revenue (DOR) has announced that it is pausing implementation of the planned increase to the Statewide Transit Tax that was scheduled to take effect on January 1, 2026. While signatures are being validated for a potential ballot referral, employers should continue to withhold the tax at the current rate of one-tenth of 1% (0.001).

The Statewide Transit Tax was originally enacted in 2017 through House Bill (HB) 2017 as a one-tenth of 1% payroll tax.

During a special legislative session in 2025, the Legislature adopted HB 3991, which was signed into law by Governor Tina Kotek in November. HB 3991 amends Oregon Revised Statutes (ORS) 320.550 to increase the tax rate to two-tenths of 1% (0.002) beginning January 1, 2026, and provides emergency funding to support Oregon's roads, bridges and transit systems.

Following the special session, petitioners began collecting signatures for Initiative Petition 302 to refer HB 3991 to Oregon voters. On December 12, 2025, the signatures were submitted to the Oregon Secretary of State. If the bill is successfully referred to the ballot, the pause on the rate increase will remain in effect pending the outcome of the election.

The DOR will continue to provide updates to employers throughout this process on its website.

Ernst & Young insights

Employers should monitor DOR communications and website updates for guidance on the status of the ballot referral and any future effective date changes. They should be prepared to adjust payroll processes promptly if the election outcome or subsequent guidance triggers the rate increase.

Employers should also confirm that their payroll vendors are using the correct rate.