State and local tax developments October 11, 2026
What changed this week
| Development | Who it affects |
|---|---|
| District of Columbia enacts permanent OBBBA decoupling (B26-0661 / Act A26-0418) | Any business or individual filing a DC corporate franchise, individual, or unincorporated business tax return with research expenses, interest expense near the section 163(j) limit, pass-through entity-level tax, or qualified production property. |
| Rhode Island opens a 75-day tax amnesty with full penalty relief and 25% interest cut | Rhode Island businesses or individuals with unfiled returns, open liabilities, or liens on delinquent corporate, sales and use, personal income, or other Division-administered tax periods ending on or before December 31, 2025. |
| California enacts cash-transaction rounding rules (A.B. 1793) | California retailers, restaurants, personal-service businesses, and any merchant that accepts cash from the public, plus their POS and ERP providers. |
| California conforms to federal section 162(m) changes and adds a journalist credit (A.B. 2222) | Publicly held California corporations with executives who are, or recently were, among the top-paid, controlled groups that now aggregate for 162(m), and California local news outlets planning 2027 hiring. |
District of Columbia enacts permanent OBBBA decoupling (B26-0661 / Act A26-0418)
The Fiscal Year 2027 Budget Support Act of 2026 took effect on October 2, 2026, and through its Tax Code Conformity and Clarification Amendment Act of 2026 decouples the District from several federal One Big Beautiful Bill Act provisions for tax years 2025 through 2029. The decoupling covers domestic research and experimental expenditures under IRC section 174A, the One Big Beautiful Bill Act change to the definition of adjusted taxable income for the business interest limitation under IRC section 163(j)(8), and the special depreciation allowance for qualified production property under IRC section 168(n). The permanent law also requires DC residents to add back their apportioned share of pass-through state and local tax that was paid by the pass-through entity and deducted from federal taxable income for tax years beginning after December 31, 2025, addresses certain disparities in the unincorporated business tax, and directs the Chief Financial Officer to study a potential DC Business Activity Tax by January 31, 2027.
Who it affects: Any business or individual filing a DC corporate franchise, individual, or unincorporated business tax return with research expenses, interest expense near the section 163(j) limit, pass-through entity-level tax, or qualified production property.
What to do
Rebuild 2025 DC taxable-income workpapers to add back the decoupled OBBBA items and the apportioned pass-through SALT deduction before you make your Q4 estimate.
Primary source: B26-0661 Fiscal Year 2027 Budget Support Act of 2026, DC Council
Rhode Island opens a 75-day tax amnesty with full penalty relief and 25% interest cut
A Rhode Island Division of Taxation amnesty program runs 75 days, from December 3, 2026, through February 15, 2027, authorized by H.B. 7127, the fiscal 2027 budget legislation. Eligible taxpayers who owe any Division-administered tax (including corporate income, personal income, and sales and use) for taxable periods ending on or before December 31, 2025, can qualify for a full waiver of penalties and a 25% reduction in interest in exchange for filing all delinquent returns and paying the full tax plus 75% of the interest. Taxpayers with existing debt will receive an amnesty-specific Statement of Account in November listing three due dates: December 15, 2026, January 15, 2027, and February 15, 2027.
Who it affects: Rhode Island businesses or individuals with unfiled returns, open liabilities, or liens on delinquent corporate, sales and use, personal income, or other Division-administered tax periods ending on or before December 31, 2025.
What to do
Pull your Rhode Island exposure list this month, decide which periods you want cleared, and plan the three payment dates so the full amount lands before February 15, 2027.
Primary source: Rhode Island Division of Taxation 2026 Summary of Legislative Changes
California enacts cash-transaction rounding rules (A.B. 1793)
A.B. 1793 was signed on September 30, 2026, and responds to the end of federal penny production by giving merchants precise rules for rounding the total transaction price to the nearest multiple of five cents in defined cash transactions. For purposes of the law, total transaction price includes any applicable taxes, fees, surcharges, or tax, fee, or surcharge reimbursement. The rule covers in-person cash sales and leaves credit, debit, and electronic transactions unaffected; the State Treasurer is authorized to promulgate implementing regulations, including exemptions. The operative date for merchants is January 1, 2027.
Who it affects: California retailers, restaurants, personal-service businesses, and any merchant that accepts cash from the public, plus their POS and ERP providers.
What to do
Have your POS vendor confirm its rounding logic matches the law, update price-list templates and receipt wording, and brief front-line staff before January 1, 2027.
Primary source: California FTB Bill Analysis, Assembly Bill 1793 (June 25, 2026)
California conforms to federal section 162(m) changes and adds a journalist credit (A.B. 2222)
A.B. 2222 was signed on September 30, 2026, and brings California into line with two federal changes to the deduction limit on executive compensation under IRC section 162(m): the expanded covered-employee definition from the American Rescue Plan Act of 2021 and the controlled-group aggregation rule added by section 70603 of the One Big Beautiful Bill Act. California Revenue and Taxation Code section 24343 is revised to apply the OBBBA aggregation rule for the Corporation Tax Law, and section 17271 is revised to apply IRC section 162(m)(3)(C) for the Personal Income Tax Law. The same bill also establishes a refundable California credit for qualifying local news outlets that hire qualifying journalists in California (up to $20,000 for each of the first five journalists, $15,000 for each additional journalist, and another $15,000 for each new journalism position) for tax years 2027 through 2031.
Who it affects: Publicly held California corporations with executives who are, or recently were, among the top-paid, controlled groups that now aggregate for 162(m), and California local news outlets planning 2027 hiring.
What to do
Have your tax team re-identify California 162(m) covered employees under the expanded ARPA definition and run the OBBBA controlled-group aggregation; if you are a local news outlet, build the 2027 hiring pipeline around the five-journalist base tier.
Primary source: California FTB Bill Analysis, Assembly Bill 2222 (May 22, 2026)
What this means for your business
- If you file in Washington DC, the permanent OBBBA decoupling and new pass-through SALT add-back change your 2025 workpapers and your Q4 estimate.
- If you have unfiled or unpaid Rhode Island liabilities for periods through December 31, 2025, there is now a defined window to clear them at a known cost.
- If you take cash in California, your rounding rules and receipts need to be ready by January 1, 2027.
- If you have a publicly held California corporation or run a California local news outlet, the new 162(m) covered-employee and controlled-group rules and the new journalist credit both change the math on compensation planning for 2027.
This week in state and local tax, in one line
DC made permanent its decoupling from parts of OBBBA and a new pass-through SALT add-back; Rhode Island opened a 75-day amnesty with full penalty relief; California added cash-rounding rules operative January 1, 2027; and California also conformed to the expanded federal 162(m) covered-employee definition and added a refundable journalist credit for 2027 through 2031.
Frequently asked questions
Q. If my business files in DC, what do I need to change for the 2025 return?
You will need to re-run your DC taxable-income workpapers to add back amounts that follow from the federal One Big Beautiful Bill Act provisions DC decoupled from under its Fiscal Year 2027 Budget Support Act of 2026, including the IRC section 174A expensing of domestic research and experimental expenditures, the OBBBA change to adjusted taxable income under IRC section 163(j)(8), and the IRC section 168(n) special depreciation allowance for qualified production property. For tax years beginning after December 31, 2025, DC residents also add back their apportioned share of pass-through state and local tax that the pass-through entity paid and deducted from federal taxable income.
Q. Who can use the Rhode Island amnesty, and what do they get?
Eligible taxpayers owing any Rhode Island tax administered by the Division of Taxation for taxable periods ending on or before December 31, 2025, can participate during the 75-day window that runs from December 3, 2026 through February 15, 2027. In exchange for filing all delinquent returns and paying the full tax plus 75% of the interest, qualifying taxpayers receive a full penalty waiver and a 25% reduction in interest.
Q. Does California A.B. 1793 cover card and online sales too?
No. The rounding rule applies to defined in-person cash transactions. Credit, debit, and electronic transactions are not subject to the rounding rule. The operative date is January 1, 2027, and the State Treasurer is authorized to promulgate implementing regulations, including exemptions.
Q. I run a California C corporation. How does A.B. 2222 change my executive compensation math?
A.B. 2222 brings California into line with two federal changes to IRC section 162(m): the expanded covered-employee definition from the American Rescue Plan Act of 2021 and the One Big Beautiful Bill Act controlled-group aggregation rule in section 70603 of OBBBA. California Revenue and Taxation Code section 24343 applies the OBBBA aggregation rule for the Corporation Tax Law, and section 17271 applies IRC section 162(m)(3)(C) for the Personal Income Tax Law. You will need to re-identify California covered employees and apply the controlled-group aggregation when computing the state deduction limit.
