What the One Big Beautiful Bill Means for States

On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act (OBBB), extending or making permanent various provisions of the Tax Cuts and Jobs Act (TCJA) of 2017. Changes to federal law don’t just impact the federal budget; they directly impact those of the individual states as well. According to the Oregon Legislative Revenue Office, the state anticipates nearly a $1B loss of revenue over the next two years due to the passage of the OBBB. States across the country will feel varying degrees of lost revenue, driven by their ties to the federal Internal Revenue Code (IRC).

States conform to the federal IRC in different ways. Rolling conformity means that a state conforms to the federal IRC as it is currently written and automatically adopt changes enacted at the federal level. Fixed or static conformity means that a state conforms to the federal IRC as of a certain date. States can also specifically decouple from specific provisions of the IRC through their own legislation and can calculate their own taxable income from different starting points, making modifications based on their own laws.

Oregon is a rolling conformity state and calculates taxable income by starting with federal taxable income, meaning that any federal income tax law changes are automatically adopted. The various business and individual income tax provisions of OBBB will reduce the taxable income that is being reported to the state, and ultimately the amount of tax that is accessed and collected by the Department of Revenue. While these provisions are generally seen as positive for the businesses and individuals who call Oregon home, it may lead the state to make tough budget decisions in the future.

Why is this important? Oregon lawmakers could decide to make changes to how they conform to the IRC, moving away from rolling conformity to something else that would allow them to raise more revenue. Not only would this impact the amount of tax Oregon businesses pay, but it would increase the complexity of reporting requirements on their Oregon income tax returns. Earlier this year, Oregon lawmakers brought this idea to the legislature, but ultimately the bill didn’t move forward.

State income taxes are becoming more and more of a burden on businesses, and it’s an important area for business owners to pay attention to, especially here in Oregon. If you have questions about how state taxes are impacting your business, please contact your Kernutt Stokes tax professional.