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State Approaches to OBBBA Income Tax Provisions
The One Big Beautiful Bill Act (OBBBA), enacted in July 2025, implemented several significant provisions, including new deductions for overtime and tips. States, in turn, have been evaluating how these federal tax changes will impact their own income tax revenue and administration. For individuals, how states respond to the federal legislation is significant because it may directly influence their state income tax obligations.
Since most states use the Internal Revenue Code (IRC) as the starting point for determining state taxation, each state must decide whether to adopt or reject (decouple) from these new federal income tax modifications. Nine states — Alaska, Florida, Nevada, New Hampshire, South Dakota, Tennessee, Texas, Washington, and Wyoming — do not impose a personal income tax and do not require conformity. For the states with an income tax, their legislative actions related to OBBBA generally fall into three categories: rolling conformity, selective (partial) conformity, and static conformity. 1
Rolling conformity states
Rolling conformity states automatically adopt amendments to the IRC, such as those in OBBBA, as the changes occur, unless the state decouples from a specific federal provision. Twenty states and the District of Columbia follow rolling conformity. 2
The primary advantage of rolling conformity is administrative clarity since the tax laws in these states will instantly reflect federal tax law changes without requiring separate state legislative action. This simplifies compliance for taxpayers, as federal income and deductions will apply for both federal and state purposes. However, states also retain flexibility to decouple if a federal provision will reduce state revenue or contradict state fiscal policy.
Unfortunately, rolling conformity may expose states to unanticipated revenue fluctuations. Acting quickly to decouple from federal provisions also can be politically difficult depending on the party makeup of the state legislators, and the transition period from state adoption to implementation may create compliance challenges or processing delays for both taxpayers and state agencies.
Selective conformity states
Selective, or partial, conformity states evaluate federal tax changes and adopt only the provisions that support revenue or policy goals while rejecting those that do not. There are four partial conformity states. 3
This hybrid type of conformity allows states to respond effectively to federal tax changes. For example, a state may elect to adopt the federal income tax deduction for tips to benefit lower-income taxpayers but decide to decouple from a different federal deduction that could reduce its tax revenue. Similarly, a state might choose to conform to a federal deduction related to overtime pay or other employment-based adjustments that align with its policy priorities while rejecting others that do not. Selective conformity allows states to protect their budgets.
However, partial conformity may create administrative challenges and unpredictability. Taxpayers will be required to apply separate federal and state income tax rules, while state agencies may have to use resources to evaluate and implement conformity. Additionally, taxpayers may face higher compliance costs and ambiguity in long-term tax planning.
Static conformity states
Static conformity states adopt the IRC on a specific date, which means that federal changes enacted after that date, such as OBBBA, do not apply unless the legislature later updates the conformity statute. Seventeen states follow this model. 4
This approach provides stability and legislative control over revenue. State lawmakers can assess the fiscal impact of each federal change before deciding to conform, meaning more budget predictability and less sudden revenue fluctuations. Taxpayers benefit from knowing that state tax law will not automatically shift in response to federal modifications.
However, problems with static conformity arise when federal law changes occur after a state's conformity cutoff date, which means taxpayers must reconcile their state returns to older definitions or rules related to income, adding complexity. Gaps between conformity updates may result in certain taxpayers receiving federal tax benefits that do not carry through to their state returns.
For a complete list of how states conform to OBBBA provisions, visit https://taxfoundation.org/
Bottom line
State conformity to federal income tax changes, such as those introduced under OBBBA, can vary widely. Depending on where you live, some, all, or none of these federal changes may apply at the state level. Because state adoption of federal tax provisions is complex and continues to evolve, you should stay informed about how your state is responding to OBBBA provisions that affect you and consider consulting a qualified tax professional to better understand the potential differences between federal and state treatment.
1–4) Tax Foundation, July 31, 2025
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