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By Kathryn Burns and Tom Cornett

Multistate businesses continue to grapple in many states with uncertain conformity to Internal Revenue Code (IRC) corporate tax provisions following the OBBBA’s (P.L. 119-21, the 2025 federal Act formerly known as the One Big Beautiful Bill Act) July enactment. Amid lobbying from business interests and the significant state revenue implications of conformity, state responses vary widely.

For example, Maryland, Rhode Island, and Virginia enacted provisions that proactively decouple from federal IRC amendments in either the current tax year, or the current and immediately succeeding tax years, while Maine granted its governor the authority to temporarily conform to federal IRC amendments contingent on legislative action. Other states, including California and Michigan, updated their IRC tie-in date during the 2025 tax year, while effectively decoupling from the OBBBA’s IRC amendments. Some state governors have asked legislatures to convene special sessions to address OBBBA conformity. Indiana Governor Mike Braun announced a special legislative session to consider conformity that convened this week, and, at the request of Delaware governor Matt Meyer, the Delaware General Assembly is slated to reconvene on November 13, in order to consider decoupling. Meanwhile, the Massachusetts Department of Revenue issued a draft technical information release (TIR) establishing the state’s approach based on pre-existing conformity provisions. Other states have addressed conformity piecemeal, issuing guidance on specific IRC provisions, while many state legislatures and taxing agencies have yet to act.

For our Checkpoint News series on OBBBA conformity, Checkpoint Catalyst surveys the complexities of the emerging corporate tax compliance landscape and highlights relevant OBBBA state conformity legislation and guidance to date.

The Labyrinth of Corporate Tax Conformity

Most states base their corporate income tax calculations on federal taxable income, so that federal tax changes as of a specified date automatically flow through to the state tax base unless the state affirmatively decouples. States with “rolling” IRC conformity automatically adopt federal changes as they occur, while states with “fixed-date” conformity adopt the IRC as it existed on a specific date. Although most states generally conform by using the federal base as a starting point, most also selectively decouple from specific IRC provisions.

The OBBBA’s enactment mid-year—after many states had established a conformity approach for the tax year—raises unique issues for states and businesses alike. The changes enacted by the law build on provisions of the Tax Cuts and Jobs Act of 2017 (TCJA), which shifted the U.S. tax system from a worldwide approach to a more territorial-based system, and the Coronavirus Aid, Relief, and Economic Security Act (CARES Act) of 2020, which amended TCJA provisions to provide taxpayers temporary relief during the COVID pandemic. Even before the OBBBA, states selectively conformed to or decoupled from parts of the TCJA and CARES Act. The cumulative effect is a labyrinth of rules requiring state modifications to the federally determined base and separate state and federal tracking of depreciation, expense deductions, and various carryforwards.

States that Proactively or Quickly Decoupled from the OBBBA’s IRC Changes

Four states—Maine, Maryland, Rhode Island, and Virginia—anticipated federal changes and proactively enacted legislation to address conformity to new law before or immediately after the OBBBA became law. These states’ approaches are as notable for their differences as for their speed of implementation.

Maine

Maine, which currently has a general IRC conformity tie-in date of December 31, 2024, [Me. Rev. Stat. Ann. Title 36 § 5295.] took a unique approach by enacting legislation on June 17, 2025, [ME P.L. 2025 c. 336.] authorizing the Governor to temporarily adjust Maine income tax filing requirements when the Commissioner of Administrative and Financial Services determines that the legislature will not have the opportunity to conform or adjust Maine laws before tax returns begin to be processed for the most recently completed tax year. The Commissioner must report in writing to the Governor describing the federal income tax law changes and their potential effect on Maine income tax laws and the state budget. Based on this report, the Governor may direct the State Tax Assessor to temporarily adjust the state’s conformity to some or all of the federal changes, contingent on the Maine legislature’s subsequent enactment of conforming laws.

In October 2025, Governor Janet Mills issued a conformity determination and directive to the State Tax Assessor addressing the OBBBA provisions for purposes of Maine corporate and individual income tax. [Determination and Direction of the Governor of the State of Maine, Maine Office of the Governor, 10/01/2025; Report on 2025 Conformity with Federal Tax Law Changes, Maine Dep’t. of Admin. and Financial Services, 09/30/2025; Troyer, Maine Provides Guidance Regarding OBBBA Conformity, Checkpoint News, 10/21/2025.] Based on various factors including budgetary impact, Governor Mills directed the State Tax Assessor to conform to various OBBBA provisions (including IRC § 163(j) business interest expense limitations and increased IRC § 179 expensing limits) for purposes of the 2025 tax year. The directive is contingent on subsequent legislative enactment. In the interim, the State Tax Assessor must process 2025 tax year income tax returns, accept payments, and issue refunds in accordance with the Governor’s conformity adjustments. If legislation is not subsequently enacted consistent with the Governor’s directive, taxpayers will be required to file amended tax returns, though they will not be subject to interest or penalty for underpayments related to any variance.

Maryland

Maryland’s pre-existing decoupling law requires the Comptroller, within 60 days of the enactment of an amendment to the IRC, to determine the impact changes will have on taxpayers and state revenue. [Md. Code Ann. Tax-Gen. § 10-108(b).] If the Comptroller finds that the impact on state revenue will be $5 million or more in the tax year that begins during the calendar year in which the IRC amendment is enacted, the amendment will not be effective for tax years beginning in the enactment year. [Md. Code Ann. Tax-Gen. § 10-108(a).] Regardless of revenue impact, IRC amendments become effective for tax years beginning in calendar years following the enactment year.

In September 2025, the Maryland Comptroller issued its analysis determining that the OBBBA amendments to IRC § 174 (research and experimental expenses), IRC § 168(n) (qualified production property depreciation), and IRC § 163(j) (business interest deduction limitation) are expected to have a $5 million or greater impact on Maryland revenues.[Maryland Comptroller Releases Analysis of Federal Tax Changes, Maryland Comptroller, 09/05/2025.] Thus, these IRC amendments will not apply for Maryland tax purposes during the 2025 tax year. Decoupling from any OBBBA provisions in the 2026 and subsequent tax years, however, will require legislative action from the Maryland General Assembly.

Rhode Island

Rhode Island enacted decoupling legislation in June 2025. [L. 2025, H5076 (c. 278); Skornicki, Rhode Island Enacts Budget Bill Increasing Several Tax Rates, Expanding Net Income Definition, Setting Various Sunset Dates, Other Provisions, Checkpoint News, 07/28/2025] For tax years beginning on or before January 1, 2025, the law amends the definition of Rhode Island net income to require corporate taxpayers to modify federal taxable income by the amount of any income, deduction, or allowance that would be subject to federal income tax “but for the Congressional enactment of the One Big Beautiful Bill Act or any other similar Congressional enactment.” [R.I. Gen. Laws § 44-11-11(a)(1)(viii).] As a result, for tax years beginning on or before January 1, 2025, Rhode Island does not conform to the amendments enacted by the OBBBA for purposes of calculating a corporation’s taxable net income, but without subsequent legislation or prior decoupling the state will conform for tax years beginning on or after January 2, 2025.

Virginia

Virginia’s approach to decoupling is more nuanced. In May 2025, Virginia amended its unique IRC decoupling provisions to provide that the state will not conform to any IRC amendments enacted on or after January 1, 2025, and before January 1, 2027, unless the Virginia legislature subsequently adopts specific IRC amendments or an IRC amendment extends the expiration date of an IRC provision to which Virginia already conforms or has previously conformed. [Va. Code Ann. § 58.1-301(B)(11)(a), as amended by L. 2025, H1600 (c. 725); Helmes, Virginia Budget Extends Pass-Through Entity Tax Election, Increases Standard Deduction, Provides $200 Rebate, Among Other Changes, Checkpoint News, 05/07/2025.] This rule replaces Virginia’s previous threshold-based approach, which provided for nonconformity only when IRC amendments were projected to impact Virginia general fund revenues by more than specified amounts ($15 million for any specific individual amendments or $75 million cumulatively).

States That Updated Conformity Dates After Enactment of the OBBBA

Both California and Michigan updated their IRC conformity dates after enactment of the OBBBA, while effectively avoiding conformity to the federal changes.

California

In October 2025, after 10 years of conformity to the IRC as in effect on January 1, 2015, the California legislature enacted legislation conforming its corporate and personal income tax laws to the IRC as it existed on January 1, 2025, effective for tax years beginning on or after January 1, 2025. Because this revised conformity date would have conformed California tax laws to amendments previously enacted by the TCJA and the CARES Act (to which California had not previously conformed), the California law also decoupled from numerous IRC provisions to maintain California’s historic nonconformity to those earlier federal changes. [Cal. Rev. & Tax. Cd. § 17024.5(a)(1)(Q); Cal. Rev. & Tax. Cd. § 23051.5(a)(1).] The revised conformity date ensures nonconformity to the OBBBA provisions, which were enacted after January 1, 2025.

Michigan

Michigan amended its IRC conformity date for both corporate and individual income tax purposes to the IRC as of January 1, 2025, or, at the taxpayer’s option, the IRC in effect for the tax year. Because most taxpayers elect to conform to the IRC as in effect for the tax year, changes resulting from the OBBBA (effective January 1, 2025) are generally applicable for Michigan corporate and individual income tax purposes. However, for tax years beginning on or after January 1, 2025, the enacted Michigan legislation includes various decoupling provisions requiring taxpayers to modify the computation specified in certain IRC provisions, including IRC § 168(k) (bonus depreciation), IRC § 179 (expensing), and IRC § 163(j) (business interest expense limitations). The Michigan Department of Treasury also advised taxpayers that due to the shifting legal landscape and the OBBBA’s changes to the federal state and local tax deduction limits, the state will provide limited relief to flow-through entities that made their first binding election to pay tax at the entity level prior to the enactment of the OBBBA. These flow-through entities can invalidate the election by requesting a refund of the taxes paid to make the election, provided their annual flow-through entity tax return has not been filed. [Notice Regarding Flow-Through Entity Tax Election Relief in Light of Pub. L. 119-21, One Big Beautiful Bill Act (OB3), Michigan Department of Treasury, 09/23/2025 [last updated].]

States That Updated Their General Conformity Dates in 2025 Before Enactment of the OBBBA

Ten states (Arizona, Florida, Georgia, Hawaii, Idaho, Kentucky, South Carolina, South Dakota, Vermont, and West Virginia) updated their general IRC conformity dates in 2025 before enactment of the 2025 Act. With the exception of Florida, and without future legislation, all of these states are decoupled from the OBBBA amendments because their adopted conformity dates predate enactment of the OBBBA.

STATES UPDATING IRC CONFORMITY BEFORE OBBBA ENACTMENT THAT EFFECTIVELY DECOUPLE

• Arizona – For tax years beginning after December 31, 2024, conforms to Internal Revenue Code in effect on January 1, 2025, excluding changes enacted after January 1, 2025 [Ariz. Rev. Stat. Ann. § 42-1001(8), as amended by L. 2025, H2688; Ariz. Rev. Stat. Ann. § 43-105(A).]
• Georgia – For tax years beginning on or after January 1, 2025, conforms to the IRC as of December 31, 2024 [Ga. Code Ann. § 48-1-2(14), as amended by L. 2025, H290.]
• Hawaii – For tax years beginning on or after January 1, 2025, conforms to the IRC as of December 31, 2024 [Haw. Rev. Stat. § 235-2.3(a), as amended by L. 2025, S1464 (Act 123).]
• Idaho – Effective January 1, 2025, conforms to the IRC as in effect on January 1, 2025, and does not incorporate the OBBBA amendments [Idaho Code § 63-3004, as amended by L. 2025, H1, effective 01/01/2025.]
• Kentucky – Effective June 27, 2025, and applicable to tax years beginning on or after January 1, 2025, conforms to the IRC in effect on December 31, 2024, and does not conform to the OBBBA amendments. [KY. Rev. Stat. Ann. § 141.010(21); L. 2025, HB775, §30.]
• South Carolina – Effective May 22, 2025, conforms to the IRC as amended through December 31, 2024 (including sections that expired on December 31, 2024, but were not otherwise amended during 2025), and does not conform to the OBBBA amendments. [S.C. Code Ann. § 12-6-40(A)(1), L. 2025, Act 63, §1.]
• South Dakota – Effective February 18, 2025, for purposes of the banks and financial institutions tax, conforms to the IRC as in effect on January 1, 2025 [S.D. Codified Laws §10-1-47, as amended by L. 2025, HB1028 §1.]
• Vermont – Enacted on May 21, 2025, retroactively effective to January 1, 2025, and applicable to tax years beginning on and after January 1, 2024, conforms to the Internal Revenue Code in effect on December 31, 2024 [Vt. Stat. Ann. Title 21 §5824. as amended by L. 2025, H493, § E.111.]
• West Virginia – Effective February 17, 2025, and retroactively applicable to tax years beginning on or after January 1, 2025, conforms to the Internal Revenue Code as amended through December 31, 2024 [W. Va. Code §11-24-3(a), as amended by WV L. 2025, c. 2.]

Florida

Florida amended its IRC conformity provisions in June 2025, retroactively applicable to January 1, 2025, to conform to the IRC as amended and in effect on January 1, 2025, with the exception that any future amendment to the IRC must be given effect for Florida tax purposes in the manner and for the periods prescribed in the IRC, to the extent that the amended provision of the IRC is taken into account in the computation of taxable net income. [Fla. Stat. § 220.03(1)(n), as amended by FL L. 2025, c. 25-208, §§60, 62; Fla. Stat. § 220.03(3).] Florida has historically updated its fixed date conformity to the current tax year to generally conform to federal amendments but selectively decouples from various provisions. [Fla. Stat. § 220.03(1)(n), as amended by FL L. 2025, c. 25-208, §§60, 62; Fla. Stat. § 220.03(3); Fla. Stat. § 220.13.] Taxpayers should monitor Florida legislative action with respect to the OBBBA provisions.

However, in response to an inquiry from Checkpoint Catalyst, a Florida Department of Revenue representative observed that although Florida has “adopted the Internal Revenue Code as of January 1, 2025,” Florida law “does not address the OBBBA, which became effective after the 2025 Florida legislative session ended. The Florida Legislature will have the opportunity to consider the OBBBA amendments to the Internal Revenue Code during the next legislative session, which is scheduled to begin January 13, 2026.” [Email from Florida Department of Revenue to Checkpoint Catalyst, on file with Checkpoint Catalyst, 11/04/2025.]

States That Have Issued Guidance Following the OBBBA

Massachusetts summary

The Massachusetts Department of Revenue issued a draft technical information release (TIR) listing 52 of the OBBBA’s provisions that the Department determined to principally affect federal gross income or federal deductions and, because Massachusetts’s IRC conformity provisions under the individual income tax and the corporate excise tax differ, the draft TIR indicates separately for income tax and corporate excise tax purposes whether the state conforms to those provisions. [Technical Information Release Working Draft TIR: Massachusetts Tax Conformity to Certain Provisions in Public Law No. 119-21, Massachusetts Department of Revenue, 10/20/2025; Nosce, Massachusetts Issues Draft Conformity to OBBBA Provisions, Checkpoint News, 10/27/2025.] Although Massachusetts conforms to many of the OBBBA provisions for corporate tax purposes, the state does decouple from other provisions based on the state’s pre-existing conformity scheme, which is tied to the IRC as currently in effect for the 2025 tax year. The Department is likely to provide further guidance in the final version of the release.

Other states may choose to address conformity to specific sections of the Internal Revenue Code as amended by the OBBBA. For example, in September 2025, the Alabama Department of Revenue issued guidance reaffirming its nonconformity to TCJA amendments to IRC §174 for expenditures incurred on or after January 1, 2024. [Research and Experimental Expenditures, Alabama Department of Revenue Notice, 09/11/2025; Del Bene, Alabama Issues Guidance on Research/Experimental Expenditures Following Enactment of OBBBAA, Checkpoint News, 09/16/2025.]

States Lacking Explicit Guidance After the OBBBA

Many major states, such as Illinois and New York, have yet to explicitly address their approach to the OBBBA’s IRC amendments. To some degree, existing law dictates a clear outcome. For example, Illinois decouples from the bonus depreciation provisions of IRC § 163(k) for tax years ending on or after December 31, 2021, [ILCS Chapter 35 § 5/203(b)(2)(T)(3)(iii)] and also decouples from IRC § 168(k). [N.Y. Tax Law § 208(9)(b)(17).] However, the OBBBA amendments raise unique questions and issues that these states will need to grapple with in the months and years to come.

Implications for Taxpayers and Practitioners

The divergent state approaches to IRC conformity and the varied methods by which state tax agencies issue guidance on OBBBA amendments create significant challenges for taxpayers attempting to monitor changes and engage in proactive tax planning.

In navigating this multistate compliance complexity, key considerations for corporate taxpayers include:

Tracking Requirements: Taxpayers will need to maintain separate depreciation schedules, expense deduction calculations, and business interest expense limitation computations for federal and various state purposes, adding to the existing complexity created by state conformity variations related to the TCJA and CARES Act.

Estimated Tax Payments: Taxpayers should carefully evaluate their state estimated tax obligations in light of potential differences between federal and state taxable income calculations resulting from conformity variations.

Planning Opportunities: Taxpayers with operations in multiple states should be alert for planning opportunities generated by the emerging conformity patchwork, including considerations around asset placement and timing of deductions.

Documentation: Taxpayers should maintain detailed documentation supporting their conformity positions, particularly in states like Maine where temporary administrative guidance may not ultimately be codified legislatively.

As states continue to grapple with the revenue implications of the 2025 Act, additional guidance and legislative action should be expected. Tax professionals should remain vigilant in tracking state-level developments and advising clients on the compliance and planning implications of this latest round of federal tax reform.

Checkpoint resources. Checkpoint Catalyst breaks down the nuances of each state’s approach to conformity in the following topics:

Catalyst Topic # 305:1000 State Treatment of the Limitation on Deduction of Business Interest Under IRC § 163(j)

Catalyst Topic # 402:1000 State Tax Treatment of Depreciation

Catalyst Topic # 403:1000 State Treatment of Expensing and Bonus Depreciation

Catalyst Topic # 1003:050 State IRC Conformity

Several State Charts briefly capture each state’s approach to the relevant OBBBA amendments:

• State Follows IRC § 163(j)—The 2025 Act (OBBB)
• State Follows IRC § 174A—The 2025 Act (OBBB)
• SALT Deduction Cap Workaround
• State Follows Bonus Depreciation—The 2025 Act (OBBB)
• State Follows Bonus Depreciation—The 2025 Act (OBBB)
• State Follows IRC § 179— The 2025 Act (OBBB)
• State Follows IRC § 179— The 2025 Act (OBBB)

 

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