Insights from DHJJ’s SALT Experts
While most headlines about the One Big Beautiful Bill Act (OBBBA) focus on federal tax changes, what’s not getting enough attention is how this legislation will ripple through to state and local taxes. And for businesses operating in multiple states, that trickle-down effect could lead to major compliance challenges and missed savings opportunities.
That’s exactly why DHJJ’s State and Local Tax specialists, Meaghan Figg, CPA, and Alexander Rivas, CPA, hosted a recent session to unpack the real-world impact of OBBBA beyond the federal level. They explored how states are responding (or not responding), what businesses need to watch for, and which strategies can help manage risk and capture benefits.
This article recaps the most important insights from that presentation, so you can make informed decisions, adapt your planning, and stay one step ahead.
Prefer to watch the full event? The full recording is available below.
The Changing State and Local Tax (SALT) Environment
The state and local tax landscape continues to evolve, and for many businesses, it’s become one of the most complex areas of compliance. With more than 10,000 taxing jurisdictions across the U.S., even small operational shifts can trigger new tax obligations.
Common SALT categories include:
- Income Tax: Based on company earnings, filed annually at the state and federal levels.
- Sales and Use Tax: Collected on goods and services, with varying state thresholds and exemption rules.
- Franchise Tax: Charged for the privilege to do business in a state, often tied to net worth or gross receipts.
- Local Taxes: Examples include Chicago business tax, Philadelphia and Pittsburgh city taxes, and personal property taxes.
For multistate businesses, tracking where and when to file is critical to avoiding penalties or missed obligations.
Economic Nexus: Beyond Physical Presence
Gone are the days when “nexus” only meant having an office or employees in a state. Most states now use economic nexus standards, which base tax liability on revenue or transaction volume within their borders. It’s important to note that sales tax thresholds and income/franchise tax thresholds are not the same. Each tax type has its own rules, and businesses can trigger one without triggering the other.
For example:
- California: $500,000 (sales tax threshold)
- California: $757,070 or 25% of total sales (franchise tax threshold)
- New York: $1,283,000 in sales (income tax threshold)
- Texas: $500,000 (franchise tax threshold)
Failing to recognize nexus exposure can result in costly audits or problems during business transactions. Buyers routinely review state tax exposure, and undisclosed liabilities can reduce a company’s valuation or delay deals.
Key OBBBA Provisions Affecting SALT Planning
The One Big Beautiful Bill Act introduced several federal changes that cascade into state tax planning. Understanding how your operating states conform, or decouple, from these updates is essential.
1. SALT Deduction Cap
The SALT cap increases from $10,000 to $40,000 ($20,000 for married filing separately). The higher limit phases down for individuals earning above $500,000.
Most states continue to offer Pass-Through Entity Tax (PTET) elections, which can shift taxes from individuals to the business entity and create potential federal deductions. However, taxpayers should review their PTET elections annually, since rules and benefits vary by state.
2. Research & Experimentation (R&E) Expensing – §174A
OBBBA reverses the TCJA rule requiring amortization of R&E expenses, allowing immediate expensing for tax years beginning after December 31, 2024.
Some states (including CA, GA, IN, PA, TX, WI) have decoupled from this provision, so businesses must check how each state will handle these deductions.
3. Bonus Depreciation & Qualified Production Property (QPP)
The OBBBA permanently extends 100% bonus depreciation, but roughly two-thirds of states do not conform. That means large capital investments may create federal benefits but limited state relief.
The new QPP deduction allows full expensing for certain domestic production property, benefiting manufacturers. States that don’t conform to federal bonus depreciation are likely to decouple from QPP expensing as well.
4. Interest Expense Limitation – §163(j)
OBBBA restores the EBITDA-based limitation on interest deductions and makes it permanent, offering more flexibility for capital-intensive businesses. State-level conformity will vary, so companies should confirm how this applies in each jurisdiction.
Strategies to Reduce Risk and Strengthen Compliance
With more complexity comes more opportunity to plan strategically. During the session, DHJJ’s SALT experts emphasized the importance of proactive review and planning:
Conduct a Nexus Study
Identify where you have filing obligations based on sales, payroll, and property. Calculate any prior-year exposure and explore options like Voluntary Disclosure Agreements (VDAs) or amnesty programs.
Review State Conformity
Track which states align, or decouple, from OBBBA provisions such as bonus depreciation, R&E expensing, and interest limitations. This ensures accurate estimated payments and reduces audit risk.
Plan Ahead for Transactions
If you’re buying or selling a business, state tax exposure can influence deal structure, pricing, and closing timelines. Early identification helps avoid surprises during due diligence.
Get Ahead of the Changes with DHJJ
The One Big Beautiful Bill Act is a reminder that tax changes rarely stop at the federal level. When new legislation rolls out, it’s the state-level impact that often catches multistate businesses off guard.
Now’s a good time to revisit your current state filing footprint. Ask:
- Are you confident you understand where you have nexus?
- Have you reviewed how each state you operate in is responding to OBBBA?
- Do you have a plan in place for tracking state-by-state conformity going forward?
Even answering just one of those questions can reveal gaps or opportunities you didn’t know were there. If you’re not sure where to begin, start by mapping where you do business and identifying any new reporting or tax changes that may apply post-OBBBA.
If you’re reviewing your multistate tax position and want a clearer picture of your obligations, consider scheduling a State and Local Tax Assessment. In just one hour, you’ll walk through where your business operates, where your people and sales are located, and which state or local taxes may apply. It’s a straightforward way to identify any gaps, confirm compliance, and understand whether further steps are needed.
