The One Big Beautiful Bill Act is triggering a fragmented response across states — one that is rapidly becoming a compliance headache for corporate tax teams, according to practitioners.

State decisions on whether to conform to the law or decouple from it have varied, although the full picture is still emerging. That’s translating into a significant compliance burden, particularly for companies with a multi-state footprint, according to Jamie Yesnowitz, a principal at Grant Thornton.

“This has become a massive tracking exercise for companies,” he said in an interview.

Businesses are navigating the widening patchwork even as concerns have also been raised about slow guidance at the federal level on certain aspects of OBBBA tax compliance.

Uncertainty weighs on CFOs

A Grant Thornton CFO survey released in January found that although concerns about OBBBA implementation had eased slightly since the third quarter of 2025, 43% of respondents still reported uncertainty around eligibility and compliance requirements, while another 43% cited challenges in adjusting tax planning strategies.

The likely scenario in the current tax season is a high volume of filing extension requests — a common practice even in normal years — pushing many returns past the April 15 deadline and toward the October timeframe, according to Justin Hill, a state and local tax partner at KPMG.

He advised companies to rely heavily on tax modeling as they navigate the process, making constant updates to account for new state developments and federal guidelines.

Some states, including West Virginia and others that conform to the Internal Revenue Code on a rolling basis, are generally aligning with the OBBBA, according to Yesnowitz. Other jurisdictions — including the District of Columbia, Michigan and Rhode Island — have moved to decouple. Those in a third group, including Illinois, Pennsylvania and Virginia, have pursued a middle path.

“It’s going to require a significant amount of modeling to understand the full impact across states,” Hill said.

The fragmentation is only expected to deepen as more states weigh in, making OBBBA more burdensome from a compliance standpoint than prior federal tax changes. “We’ve already seen quite a bit of activity early on,” Hill said. “Compared to prior reforms, states have been more active.”

Federal-state tensions surface

In Washington, D.C., the conformity debate has been particularly contentious, escalating into a major federal-local confrontation over tax authority.

U.S. Treasury Secretary Scott Bessent criticized the trend in a December statement, accusing Democrat-led states of seeking to block “the most pro-worker, pro-family legislation in a generation.”

A day later, the Institute on Taxation and Economic Policy, a left-leaning tax policy organization based in Washington, reacted with a statement slamming the administration’s position on the issue.

“There is a reasonable debate to be had — and states are reasonably considering their options — as to whether various provisions of the federal tax bill should be incorporated into state tax codes,” the group said.

Yesnowitz said a mix of both political and fiscal issues are driving state responses to the OBBBA, a signature law of President Donald Trump’s second administration.

“Some of the more progressive states are tending to decouple from the law, and some of the more conservative states are tending to conform,” he said. “But it is not as consistent as I would have expected several months ago — and the reason for that is money. The legislation is going to cost the states a fair amount of money because of the narrowing of the federal income tax base.”

A growing number of states, regardless of political leaning, are moving toward the middle path, Yesnowitz said.

States are wrestling with fiscal implications of several key provisions from last year’s tax law, including bonus depreciation, research and development expensing, and the deduction for foreign-derived intangible income.

Each offers significant tax benefits for companies but presents a more complicated calculus for states, according to Matt Gardner, a senior fellow at the ITEP.

“States are being asked to absorb tax cuts while also dealing with cuts in federal support,” Gardner said. “From that perspective, it’s pretty sensible that you’d see a lot of states contemplating decoupling right now.”