Retroactive tax law changes pose challenges
The federal OBBB included retroactive tax changes for the 2025 tax year, including those affecting bonus depreciation under IRC § 168(k), research and experimental expenditures under IRC § 174, and the business interest limitation under IRC § 163(j). While these changes were made at the federal level, they can serve as the starting point for state tax.
Amid budget concerns over the new OBBB provisions, many states decoupled or adjusted their conformity to the federal Tax Code this year. Over 20 states have decoupled or only partially conformed to the OBBB, Machemer said during an August 26 EY webinar. However, those changes often occurred after taxpayers already estimated their tax liability.
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