Alan Goldenberg

When the federal government shut down Oct. 1, the IRS was among the agencies forced to substantially reduce or halt most operations. While the short-term disruption captured headlines, the true cost will reveal itself after the government fully reopens. For businesses and tax professionals, the shutdown triggered long-lasting operational and compliance challenges.

State governments across the country are preparing for the ripple effects of the sweeping federal tax package signed into law July 4. Federal changes often trigger a complex chain reaction at the state level because many states piggyback on the federal tax code to administer their own income taxes. Whether a state automatically adopts the changes in the $3.4 trillion tax package or chooses to decouple depends on its approach to federal tax conformity—a critical concept in state tax policy.

The tax bill that passed the House last month increases the state and local tax deduction cap, partially repeals pass-through entity tax deductibility, and makes modifications to tax code Section 199A’s qualified business income deduction. These proposed changes carry several implications for how the tax code treats different types of income, industries, and taxpayers.