The One Big Beautiful Bill Act (OBBBA) is triggering fragmented responses across states—a situation that tax practitioners observe is quickly becoming a compliance challenge for corporate tax teams.

States are divided on whether to conform to or decouple from the federal law, though the full picture is still emerging. Jamie Yesnowitz, a principal at Grant Thornton, says this means a significant compliance burden for businesses with multi-state operations.

"This has become a massive tracking exercise for businesses," he said in an interview.

Companies are grappling with an increasingly fragmented interstate policy patchwork, while at the federal level, guidance on certain tax compliance aspects of OBBBA has beenslow to emergewhich is also raising concerns.

Uncertainty weighs on CFOs

A Grant Thornton CFO survey released in January shows that while concerns about OBBBA implementation have eased slightly since the third quarter of 2025, 43% of respondents stillreport uncertainty about eligibility and compliance requirements, and another 43% say they face challenges in adjusting tax planning strategies.

Justin Hill, a state and local tax partner at KPMG, notes that so far, many companies may have already filed for tax return extensions—a common practice even in normal years—thereby pushing their filings past the April 15 deadline into the October filing season.

He advises companies to rely heavily on tax modeling as they navigate this process, continuously updating models based on the latest state developments and federal guidance.

Yesnowitz says some rolling-conformity states, including West Virginia, which automatically follow the Internal Revenue Code, are generally aligned with OBBBA. Other jurisdictions such as Michigan and Rhode Island have chosen to decouple. A third group of states, including Illinois, Pennsylvania, and Virginia, are taking a middle path, choosing to conform to some provisions but not all.

"Understanding the full impact across states requires a lot of modeling work," Hill said.

As more states weigh in, this fragmentation is expected to deepen further, making OBBBA more challenging on the compliance front than previous federal tax reform bills. "We've already seen quite a bit of early activity," Hill said. "States have been more proactive compared to prior reforms."

Tensions escalate

In Washington, D.C., the debate over conformity has been particularly intense, escalating into a clash over tax authority between thefederal government and local jurisdictions。

U.S. Treasury SecretaryScott Bessent criticized this trend in a December statement, accusing Democratic-led states of trying to obstruct "the most pro-worker, pro-family bill in a generation."

A day later, the left-leaning tax policy organization—the Institute on Taxation and Economic Policy (ITEP)—issued a statementcriticizing the administration's stance。

The group said: "There is legitimate room for debate over whether certain provisions of the federal tax bill should be incorporated into state tax codes—states are reasonably considering their options."

Yesnowitz says both political and fiscal factors are driving state responses to OBBBA, the signature bill of President Donald Trump's second term.

"Some of the more progressive states tend to decouple, while some of the more conservative states tend to conform," he said. "But it's not as uniform as I might have expected a few months ago—and the reason is money. The bill, by narrowing the federal income tax base, will impose quite significant fiscal costs on states."

Yesnowitz notes that regardless of political leanings, a growing number of states are moving toward the middle path.

States are weighing the fiscal impact of several key provisions in last year's tax bill, including bonus depreciation, research and development expensing, and the foreign-derived intangible income deduction.

Matt Gardner, a senior fellow at ITEP, says these provisions offer significant tax benefits to businesses but create more complex calculations for states.

"States are being asked to absorb tax cuts while also dealing with cuts in federal support," Gardner said. "From that perspective, it's quite reasonable to see many states now considering decoupling."