2025 DEC State Tax Matters: Navigating the OBBBA Decoupling Wave
To be honest, just when we think we’ve finally figured out the tax landscape, a new federal bill like the “One, Big, Beautiful Bill Act” (OBBBA) comes along and shakes everything up. If you’ve been feeling a bit overwhelmed trying to track how every single state is reacting, you are definitely not alone! I’ve spent the last few days diving deep into the latest state tax matters, and let’s just say, the end of 2025 is bringing some massive shifts. Whether you’re dealing with e-commerce in Illinois or streaming services in California, there’s a lot to unpack. But don’t worry—I’ve got your back. Let’s walk through these updates together so you can head into 2026 with confidence! 😊
The Great Decoupling: Illinois and Pennsylvania Respond to OBBBA 🏗️
The federal OBBBA (P.L. 119-21) has sent ripples through state legislatures, and Illinois was quick to act. On December 12, 2025, Illinois enacted Senate Bill 1911. What does this mean for you? Well, Illinois is doubling down on its “decoupling” strategy. Specifically, the state continues to disconnect from federal bonus depreciation under IRC Section 168(k). If you were hoping for a simple alignment with federal rules, I’m afraid it’s not happening here.
Pennsylvania is in a similar boat. With the enactment of Act 45 (House Bill 416) in November 2025, the Commonwealth is also decoupling from several federal OBBBA provisions. This includes research and experimental expenses, as well as business interest expenses. It’s a lot to keep track of, but the main takeaway is that your federal tax return and your state return are going to look very different this year.
Illinois has also removed the sunset date for the pass-through entity tax election, making it a permanent fixture for now. This could be a significant planning opportunity for your business structure.
| State | Key Action | Focus Area |
|---|---|---|
| Illinois (S.B. 1911) | Enacted Dec 12, 2025 | Bonus Depreciation & Net CFC Income |
| Pennsylvania (Act 45) | Enacted Nov 12, 2025 | R&D Expenses & Interest Deductions |
Massachusetts Life Sciences: Don’t Miss the Window! 🔬
If you’re in the life sciences sector in Massachusetts, listen up! The Massachusetts Life Sciences Center (MLSC) is expected to open its 2025 Tax Incentive Program this month. In my experience, these windows fly by. Usually, the application opens in December and slams shut by February. These incentives can be refundable, meaning they can provide a direct cash boost to your 2025 corporate excise tax return.
The MLSC program is highly procedural. If you miss the February deadline, you’ll likely have to wait an entire year for the next cycle. Start gathering your documentation now!
Ohio’s CAT Clawback: The “Agency” Debate 📊
Ohio is currently refining its Commercial Activity Tax (CAT) rules, and it’s hitting service providers hard. The Department of Taxation has released draft changes regarding the “agency exclusion.” Essentially, the state is trying to limit who can claim they are merely an “agent” for a client when they receive reimbursements.
I’ve seen many businesses get tripped up here. If you’re a contractor and your client reimburses you for expenses, Ohio now broadly considers those reimbursements as taxable gross receipts unless you can prove a very strict agency relationship. The Ohio Supreme Court recently ruled against a food service provider on this exact issue, so the state is now codifying that tougher stance.
📝 Ohio CAT Deadline
Public comments on these draft rules are due by December 29, 2025. If this affects your business model, now is the time to speak up!
California Streaming: New Franchise Fees? 📺
In a move that could set a major precedent, a California Appellate Court recently held that streaming entertainment companies are liable for local franchise fees in Santa Barbara. The court’s logic? It doesn’t matter if the content is delivered via a dedicated cable line or through a customer’s own ISP. If you provide “video services” for a fee, the city wants its cut.
This is a big shift from the traditional thinking that franchise fees only applied to companies digging up streets to lay cable. If you’re a digital service provider, you should keep a close eye on this. Other cities in California (and potentially other states) may soon follow suit to bolster their local budgets.
Illinois E-commerce: Goodbye 200-Transaction Threshold 👩💻
Starting January 1, 2026, Illinois is simplifying (or complicating, depending on how you look at it) its economic nexus rules. They are repealing the 200-transaction threshold for remote sellers. Now, you only need to worry about the $100,000 gross receipts threshold. While this sounds simpler, the penalties for not being able to determine a “destination-based” tax location are getting steeper—up to 15%.
Illinois Nexus Quick Check 🔢
Maryland’s Digital Frontier: IT Taxes and Ad Rules 🧮
Maryland is moving forward with its new 3% sales tax on certain IT and data services, which went into effect earlier this year. But the real news is the clarification on the Digital Advertising Gross Revenues Tax (DAGRT). The state has clarified that for an ad to be taxable, it must be both programmatic and conveyed visually. If you’ve paid tax on ads that don’t meet both criteria, you might actually be eligible for a refund for up to three years back!
Key Takeaways: December 2025 Update 📝
At-a-Glance Summary
Frequently Asked Questions ❓
Taxes are never fun, but staying informed is half the battle. If you’re feeling a bit lost in the OBBBA weeds or have questions about a specific state ruling, please drop a comment below or reach out to your tax advisor. Let’s navigate this shifting landscape together! 😊
