CFOs face biggest OBBBA tax risk at state level
Mark Nachbar serves as a principal in the national tax office for Plano, Texas-based tax service provider Ryan. Views are the author’s own.
The One Big Beautiful Bill Act — signed into law on July 4, 2025 and effective retroactively to Jan.1, 2025 — delivered federal tax relief and significantly changed the tax landscape for many enterprises. Companies can write off equipment and research faster and deduct more of their interest expenses, and for most CFOs, the federal modeling is largely done. The harder question facing finance leaders is, how much of that benefit actually survives at the state level?
For many companies, the answer is less than they expect.
States do not automatically follow Federal Tax Legislation: At this point most states have addressed the Federal Legislation. There are seven states that are still in legislative session, and could still consider conformity legislation. Among those, the only ones with pending conformity legislation are the District of Columbia and Massachusetts. There are a few Virginia conformity bills that will carry over to next year, but the Virginia legislature has already completed their main conformity bill.
Whether your company keeps a federal benefit in a given state depends on how that state’s tax law connects to the federal code, and how that state’s legislature has chosen to adopt any changes.
Conformity is not automatic
There are, broadly, two kinds of states. Rolling conformity states automatically pick up federal changes as they happen, and may modify those changes. Fixed-date states, meanwhile, follow the federal code only as of a set date and need their legislatures to act to update their law when a new federal law applies. The distinction between the two determines whether a benefit is applied.
For two examples, Rhode Island automatically adopted OBBBA, then passed its own legislation to opt out of several of the act’s most valuable pieces, including faster write-offs for equipment and research and certain interest deductions. North Carolina sits at the other end. Its tax law is frozen as of Jan. 1, 2023, before OBBBA existed, so unless the legislature acts, the new law does not apply there at all. Both states appear as having addressed OBBBA in industry trackers, but neither state necessarily passes the federal benefit through to your company.
Another example of complexity concerns Washington, D.C. The district passed a law opting out of several OBBBA provisions, and Congress then stepped in and effectively overrode it, requiring the district to conform. D.C. may still challenge that outcome, which leaves companies operating there without a settled answer.
There is a structural reason prompting many states to opt out. The federal government can run deficits, and states cannot. OBBBA’s business provisions reduce taxable income and with it state corporate tax revenue. A state that fully conforms absorbs that revenue loss, and many cannot do so without raising taxes elsewhere. That math and politics are driving most of the opt-out decisions, and it will keep shaping how states respond as legislative sessions continue.
For a CFO, this is not a technicality. A company that receives 100% bonus depreciation federally might receive 40%, 20%, or no depreciation from a state depending on that state’s rules. Multiply that across every state where you file, and the difference lands in cash taxes, your effective tax rate and the state tax attributes you carry forward.
Companies that are on top of this are building a state-by-state view of each major provision and keeping separate state depreciation and attribute schedules. Some are going further and weighing state conformity when they decide where to place new investments, because the after-tax economics now differ meaningfully from one state to the next.
The 2025 compliance risk
For CFOs, the timing is the immediate problem. The law was enacted in July 2025, but applies back to Jan.1, 2025. Estimated payments came due throughout 2025, and the original due dates for 2025 returns were in April 2026, while many states were still debating conformity. For a meaningful number of companies, the correct 2025 state liability was not knowable with confidence by the initial filing deadline.
For public companies, the stakes are higher. The tax provision in the financial statements rests on management’s best estimate of the applicable state rates and bases. A company that has not tracked state conformity closely could face restatement exposure if the final outcome in a material state differs from what it booked.
To address this issue, CFOs should take several steps:
First, do not assume the federal benefit carries to the states. Treat each major provision, state by state, as its own question.
Second, plan to keep separate state calculations and attribute trackers, because state depreciation, interest limits, and carryforwards may look nothing like the federal numbers.
Third, watch structure as closely as politics. Timing, filing methods, and how a state defines its tax base can decide whether a federal benefit shows up on your state return or disappears.
Federal tax changes rarely reach the states cleanly, and OBBBA, because of its size and its retroactive start date, is a sharper version of that familiar problem. The companies that treat state conformity as active, ongoing work will capture OBBBA’s full value. The ones that assumed the states would simply follow Washington may find the picture more complicated once the returns are filed.
