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1 Jared Walczak, State Tax Implications of the One Big Beautiful Bill Act 1 (2025)

handle is hein.taxfoundation/stetxipcat0001 and id is 1 raw text is: *%TAX FOUNDATION State Tax Implications of the One Big Beautiful Bill Act Jared Walczak Vice President of State Projects July 2025 Key Findings * Many provisions of the One Big Beautiful Bill Act (OBBBA) flow through to state tax codes through their conformity with the Internal Revenue Code. * Incorporation of these provisions depends both on the currentness of a state's conformity and wheth- er the state incorporates, decouples from, or modifies each specific federal provision. * The new or enhanced personal deductions (the temporarily higher standard deduction for seniors and the temporary deductions for qualified tips, car loan interest, and overtime premium pay) each flow through to some or all of the seven states that begin with federal taxable income. * Eighteen states' property tax deductions will increase in line with the higher federal state and local tax deduction (SALT) cap. * The restoration of full expensing for machinery and equipment under § 168(k) is slated to impact 17 states, a higher § 179 cap for small business expensing will flow through to 38, and the restoration of § 174 research and development expensing and the creation of a new § 168(n) cost recovery provi- sion for certain structures will show up in virtually all states' tax structures. * Within the international tax regime, the transition from a tax on global intangible low-taxed income (GILTI) to one on net CFC-tested income (NCTI) makes continued state conformity to the provision less tenable, as states only incorporate an incoherent patchwork of the regime's provisions. * Beginning in FY 2028, new limitations on Medicaid provider taxes will reduce states' federal matching funds. * While many of the temporary provisions confer very little economic benefit, the restored and enhanced business expensing provisions are pro-growth, represent sound tax policy, and merit incorporation into state tax codes. The Tax Foundation is the world's leading nonpartisan tax policy 501 (c)(3) nonprofit. For over 80 years, our mission has remained the same: to improve lives through tax policies that lead to greater economic growth and opportunity. TAX FOUNDATION 1325 G STREET, NW, SUITE 950, WASHINGTON, DC 20005 202-464 62001 laxfoundation.org