The stimulus payment reduces the federal tax subtraction on the Oregon return. Why? Because Oregon Dept of Revenue says it does. There are other items that also reduce the federal tax subtraction, if you have them, like the American Opportunity refundable credit. But let's stick with the stimulus payment. Last I checked, there is still an error in the software. The second stimulus payment is also supposed to reduce the federal tax subtraction (as per the guidance from Dept of Revenue that I posted), but the software doesn't do this. So you have to override the software and uncheck the error box when efiling in order to reduce the federal tax subtraction even more (thus increasing the Oregon tax or reducing the Oregon refund) to get it correct. Otherwise, your client will likely receive an adjustment letter from Oregon. There is no problem with the software if the client did not receive either stimulus and instead is requesting a rebate credit on the federal return. In that case, the software correctly subtracts the total rebate credit from the federal tax subtraction on the Oregon return. The only issue occurs when the second stimulus was already received.