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Kozi Checks & Balances TaxTactics News

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July 31.2025

2 Minutes Read

Understanding State Tax Implications of the One Big Beautiful Bill Act

Colorful wooden USA map illustrating state tax implications.

The Impacts of the One Big Beautiful Bill on State Taxes

The recently enacted One Big Beautiful Bill Act (OBBBA) introduces significant changes to federal tax policies, many of which ripple through to state tax codes across the country. This article aims to unpack these state tax implications in a way that is accessible and clear for all readers.

Understanding State Conformity to Federal Tax Reforms

States typically align their tax codes with the Internal Revenue Code, which means changes at the federal level can directly impact state income tax systems. In the case of the OBBBA, some states may incorporate the new provisions outright while others might opt to decouple from certain elements. This decision-making process will largely dictate how quickly and effectively state tax policies can respond to the changes introduced by the bill.

Personal Deductions and State Property Tax Changes

Among the most essential provisions is the increase in personal deductions, particularly the enhanced temporary standard deduction for seniors and other specific deductions. States leveraging federal taxable income for their own tax calculations will see these adjustments flow through, potentially resulting in notable shifts in state revenue. For example, 18 states have already anticipated adjusting their property tax deductions to align with these new federal standards.

Business Expensing Provisions: A Growth Opportunity

The renewed emphasis on full expensing for machinery and equipment is poised to have a significant economic impact across 17 states. By allowing businesses to deduct the full cost of qualified investments immediately, the OBBBA encourages more companies to invest in new technologies, thereby boosting productivity and job creation. This part of the bill could inspire states to revisit their tax incentives to foster an environment conducive to business growth.

Looking Ahead: Future Predictions on Tax Revenue

Beginning in fiscal year 2028, new limitations on Medicaid provider taxes are expected to reduce federal matching funds for states, which could present challenges for funding local healthcare initiatives. As these changes unfold, states will need to adeptly navigate their fiscal landscapes, adjusting their tax codes and strategies to maintain balance and ensure necessary revenue streams.

Staying informed about these shifts in tax policy offers tremendous value. As taxpayers or business owners, understanding how the OBBBA influences state taxes can empower you to make more informed financial decisions and advocate for policies that support local economic growth.

Tax Deduction Deep-Dives

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07.25.2025

Understanding the Future of BEAT Tax and Its Global Impact

Update The Evolution and Future of the BEAT Tax As corporations navigate the complex US tax landscape, the base erosion and anti-abuse tax (BEAT) emerges as a focal point in discussions surrounding international corporate taxation. First introduced under the Tax Cuts and Jobs Act of 2017, BEAT serves as a mechanism specifically targeting multinational entities that deduct significant expenses linked to profit shifting—a practice that allows companies to sidestep US corporate tax obligations. However, recent legislative developments under the One Big Beautiful Bill Act (OBBBA) have driven a renewed dialogue about the alignment and effectiveness of BEAT in curbing tax avoidance. Understanding BEAT: The Basics BEAT applies to large corporations with average annual receipts exceeding $500 million, particularly those whose base erosion payments reach 3% of their total deductions. This tax was initially set at a rate of 10%, slated to increase to 12.5% in 2026. However, the OBBBA has modified this trajectory by establishing a slightly higher BEAT rate of 10.5%, which, while seeming like an increase, does little to address the systemic issues it aims to solve. This creates a challenging environment for both domestic and foreign companies planning investments in the U.S. Challenges of Implementation and Hidden Flaws The intent behind BEAT is to identify and tax payments likely related to profit shifting, such as royalties and interest. Yet, the current framework neglects crucial considerations about the tax jurisdictions receiving these payments. By not accurately assessing whether these transactions are made to high-tax areas, BEAT risks punishing legitimate business operations and discouraging foreign direct investment more than it deters tax evasion. Future Implications of BEAT under OBBBA Despite initial proposals to revamp BEAT more thoroughly, the OBBBA leaves much unaltered, revealing a legislative struggle between protecting domestic tax revenue and fostering a competitive investment climate. The discarding of substantial changes, such as the punitive enforcement through Section 899, suggests an ongoing debate about how best to balance these two opposing aims. Why Understanding BEAT Matters Now The complexities surrounding BEAT will have lasting implications not only for multinational corporations but also for global economic relations. As investors scrutinize U.S. tax policy, clear communication and responsive modifications to legislation will be crucial in maintaining the nation’s attractiveness as a business destination. Engaging in informed discussions about BEAT and its role in international taxation is essential for business owners navigating this landscape.

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Do Trump Accounts Actually Help Families Save? Let's Find Out

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How the OBBBA’s Changes to Expensing Can Boost State Economies

Update Why States Should Adopt Full Expensing Provisions The recent passage of the One Big Beautiful Bill Act (OBBBA) brings significant changes to how businesses can expense their investments, with substantial implications for state tax codes. As the bill advocates for full expensing, states are presented with a choice: either align their tax systems with these pro-growth policies or risk lagging behind in fostering investment and economic development. Understanding the Impact of Expensing Full expensing allows businesses to deduct the cost of their investments immediately, which can encourage more substantial capital expenditure. This shift away from traditional depreciation, which spreads the deduction over many years, represents a fundamental change in how businesses can manage their taxable income. States are now challenged to rethink how their own tax policies can support these beneficial changes. Economic Justifications for State Conformity The economic rationale for conforming to OBBBA's expensing provisions is straightforward: enhancing capital investment leads to increased worker productivity and, ultimately, job creation. By removing barriers that depreciation schedules impose, states can create a more favorable environment for businesses, attracting companies that might otherwise hesitate to invest. Comparing State Responses While the OBBBA has set a solid framework, the responses from individual states will vary. Some states are already positioning themselves to incorporate these new provisions into their tax codes, while others may be slower to adopt changes. The urgency for action is clear; states that embrace full expensing could see significant revenue growth as businesses thrive. Investments in Innovation and Competitiveness One of the standout features of OBBBA is its focus on innovation, reversing previous policies that hampered the immediate expensing of research and development costs. This change signifies recognition of the importance of nurturing innovation-driven economic landscapes. States that recognize the value in aligning their tax policies with these changes will likely see a surge in competitiveness and innovation. In conclusion, as states grapple with the implications of OBBBA, embracing its expensing provisions could lead to profound economic benefits and a more prosperous business environment. The time to act is now—states should ensure their tax structures support sustainable growth for all.

Understanding State Tax Implications of the One Big Beautiful Bill Act

The Impacts of the One Big Beautiful Bill on State Taxes

Understanding State Conformity to Federal Tax Reforms

Personal Deductions and State Property Tax Changes

Business Expensing Provisions: A Growth Opportunity

Looking Ahead: Future Predictions on Tax Revenue

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