The One Big Beautiful Bill Act changed federal tax rules for depreciation, interest deductions, and individual deductions for overtime and tips. Whether those changes affect your state tax return depends entirely on where you file. Some states adopted OBBBA automatically, others rejected it outright, and many are still deciding.
This guide covers how each conformity type works, which states have decoupled from specific OBBBA provisions, and the compliance steps for managing multi-state filings when the rules vary by jurisdiction.
The One Big Beautiful Bill Act introduced several changes to the Internal Revenue Code: new deductions for overtime and tip income, restored 100% bonus depreciation under IRC Section 168(k), and modifications to business interest expense limitations under IRC Section 163(j). Whether any of this affects your state tax liability comes down to one question - how does your state handle IRC conformity?
States take three main approaches:
Once you know your state's conformity type, you can determine whether federal OBBBA deductions and credits flow through to state returns - or whether you calculate state taxable income under different rules entirely.
States decouple from federal tax provisions to protect revenue. When the federal government creates new deductions, conforming states could lose up to $38.2 billion unless they act. Here are the major OBBBA provisions driving decoupling decisions.
OBBBA restored 100% bonus depreciation for qualified property, allowing immediate expensing rather than depreciation over time. Many states reject full expensing because it reduces taxable income significantly in the year of purchase. You'll see states require an addback of bonus depreciation, then allow a corresponding subtraction spread over the asset's useful life.
Prior to OBBBA, federal treatment of R&E expenditures under IRC Section 174 required amortization over five years (fifteen years for foreign research). OBBBA introduces Section 174A, restoring the immediate expensing domestic R&D-related expenses. Some states have decoupled to require amortization, while others follow the federal expensing option. Your state's position affects the timing of deductions for clients with significant R&D spending.
The Qualified Small Business Stock exclusion under IRC Section 1202 allows eligible taxpayers to exclude up to 100% of gain on the sale of qualifying stock. Several high-tax states do not conform to this exclusion, protecting $1.2 billion in annual revenue. California taxes QSBS gains at its top rate of 13.3%. A client selling QSBS may owe zero federal tax on the gain but face a substantial state tax bill.
IRC Section 163(j) limits business interest deductions to 30% of adjusted taxable income, with certain exceptions. OBBBA modified these rules, and states have responded differently. Some conform to the federal limitation, others use pre-OBBBA rules, and a few have no limitation at all.
OBBBA made changes to net operating loss carryback and carryforward rules. States decouple from federal NOL provisions to limit the revenue impact of large loss carrybacks or to maintain their own carryforward periods.
Several states with rolling conformity have adopted OBBBA provisions for tax year 2026, either automatically or through updated legislation. States in this category updated their conformity statutes in late 2025 or early 2026 legislative sessions.
Even "conforming" states maintain specific modifications. Rolling conformity doesn't mean complete conformity - many states that follow the current IRC still maintain permanent decoupling from provisions like bonus depreciation or require state tax addbacks. Verify the details for each provision affecting your client.
Tip: Check whether your rolling-conformity state has carved out specific OBBBA provisions. The conformity label alone doesn't tell the whole story.
The following states have enacted legislation or issued guidance rejecting specific OBBBA provisions. The scope of decoupling varies - some states reject only bonus depreciation, while others have broader carve-outs.
California has updated their static conformity to the IRC as of January 1, 2025, with selective updates. The state has not adopted OBBBA provisions and does not conform to the QSBS exclusion, bonus depreciation, or the new overtime and tip deductions. California taxpayers face significant state-level adjustments.
Delaware enacted legislation decoupling from OBBBA's bonus depreciation provisions and certain business interest expense modifications to address an estimated $400 million revenue loss. The state maintains its own depreciation schedule for state tax purposes.
DC has decoupled from several OBBBA provisions, including bonus depreciation and the overtime and tip deductions. The Council based its choices on both revenue impact and administrative burdens. Taxpayers with DC filing obligations calculate state taxable income using pre-OBBBA rules for affected items.
In early 2026, Illinois selectively decoupled from OBBBA's depreciation provisions while conforming to other changes. The state requires addback of bonus depreciation with a corresponding subtraction over the federal recovery period.
Maine updated its IRC conformity date but decoupled from specific OBBBA provisions affecting business income. Check current guidance for the complete list of modifications.
Michigan updated its IRC conformity date in October 2025 but simultaneously decoupled from several OBBBA provisions. The state rejected the special depreciation rules under Sections 168(k) and 168(n), modifications to Section 163(j), and addition of Section 174A.
Pennsylvania decoupled from OBBBA's bonus depreciation and certain business deduction provisions. The state's flat 3.07% rate applies to the full amount of QSBS gains - there's no exclusion at the state level.
Texas franchise tax uses its own calculation of taxable margin, which doesn't directly conform to federal taxable income. The state has issued guidance clarifying how OBBBA changes affect the starting point for margin calculations.
Last updated: January 27, 2026
This table summarizes conformity positions for major states. Positions may change as legislatures act throughout 2026.
When OBBBA conformity varies by state, a systematic approach keeps you organized.
Map which clients have nexus in states with divergent OBBBA treatment. A client with operations in California and Iowa faces different state tax calculations for the same federal return.
Research each state's conformity date and any selective decoupling provisions. State department of revenue websites publish official guidance, though finding current information across dozens of jurisdictions takes time.
Determine the addback or subtraction modifications for depreciation, NOLs, interest expense, and other affected items. Each state's modifications create a unique state taxable income figure.
Maintain citation-backed workpapers linking to state code, regulations, or official guidance. Clear documentation protects both you and your client if questions arise later.
Track legislative sessions for conformity updates throughout the year. Several states are still considering OBBBA-related bills, and positions may change mid-year.
Decoupling continues as states prioritize revenue protection. Expect ongoing legislative activity as states respond to federal changes throughout 2026.
Tax professionals working across multiple jurisdictions benefit from tools that surface current state positions quickly and link directly to authoritative sources. A state's position in January may look different by June.
Tracking state OBBBA conformity across multiple jurisdictions means cross-referencing state statutes, DOR guidance, and pending legislation - often for a single client engagement. Marble surfaces answers to federal and state tax questions in plain English with citations linked directly to code, regulations, or official guidance.
With Projects, you upload client documents and add engagement context so your assistant retains the facts across multi-state compliance work. Your data stays private and encrypted - never used to train public models.
If a state hasn't issued guidance, its existing IRC conformity date and selective decoupling rules apply. Monitor official state tax agency announcements for updates as legislative sessions progress.
Base estimated payments on the most current available guidance and adjust when the state issues final conformity rules. Document your assumptions in case of later amendments or retroactive changes.
Yes. States enact retroactive conformity or decoupling legislation regularly. Monitor legislative sessions and official guidance throughout the year.
PTE tax elections may calculate taxable income differently based on state conformity. Verify whether your state's PTE tax follows federal OBBBA provisions or applies its own modifications before making the election.
Check each state's department of revenue website for official notices, regulations, and legislative updates. Marble surfaces citation-backed answers linked directly to authoritative sources, reducing research time across jurisdictions.
