Several states passed corporate tax law changes in the first quarter of 2026, responding to the federal One Big Beautiful Bill Act (OBBBA) signed on July 4, 2025. The new laws affect how businesses handle depreciation, research and development expenses, and interest deductions at the state level.
The changes vary sharply from state to state, which matters for any small business filing in more than one jurisdiction.
Indiana updated its Internal Revenue Code (IRC) conformity date to January 1, 2026 through Senate Bill 243, signed by Governor Mike Braun on March 5, 2026. That generally brings Indiana in line with the OBBBA, but with notable carve-outs. Indiana decoupled from the OBBBA’s new bonus depreciation provisions under sections 168(k) and 168(n), meaning businesses cannot claim the full 100% first-year depreciation write-off on their Indiana returns even if they do on their federal returns.
Virginia Governor Abigail Spanberger signed House Bill 29 on February 20, 2026, setting the state’s IRC conformity date to December 31, 2025. Virginia explicitly decoupled from OBBBA bonus depreciation under both Section 168(k) and 168(n), and from changes to R&D expense rules under Sections 174 and 174A. Virginia does conform to the OBBBA’s updated business interest expense limits under Section 163(j), but reduced its own additional deduction for disallowed interest from 50% to 20%.
Texas took a different path. The state Comptroller issued guidance in December 2025 indicating that Texas will conform to federal bonus depreciation rules for assets placed in service after January 19, 2025, starting with the 2026 franchise tax report year. It also requires a one-time depreciation adjustment to account for prior-year differences between federal and state treatment.
At the federal level, the OBBBA permanently restored 100% bonus depreciation for qualifying property acquired after January 19, 2025 and reinstated immediate expensing for domestic R&D costs. But whether those benefits pass through to your state tax return depends entirely on where you operate.
For small businesses filing in multiple states, the practical takeaway is straightforward but demanding. Federal and state tax returns may now show different depreciation, R&D, and interest deduction amounts. A deduction claimed on a federal return may need to be added back on a state return, or vice versa. Working with a tax adviser who understands the conformity rules in each state where you file is important to avoid surprises and missed deductions. More states are expected to finalize their own conformity decisions through mid-2026.
