The One Big Beautiful Bill Act (OBBBA), passed last summer, is the most
Just as they did in response to the TCJA, states must now decide how to incorporate the OBBBA’s changes. Should they adopt these federal provisions at the state level? Or should they decouple — or partially decouple — from them?
The OBBBA is impactful, but its larger economic impact will ultimately be shaped by how states respond.
In early March 2026, Governor DeWine signed Senate Bill 9 (SB 9) into law. This law addresses whether — and to what extent — Ohio conforms to changes made to the Internal Revenue Code following the passage of the OBBBA. Here’s a summary of the changes:
The TCJA changed the timing of when taxpayers could deduct R&D expenses. Beginning in 2022, research and experimental expenditures could not be deducted the year they were incurred; they were instead required to be amortized over five years. The OBBBA reversed this decision, letting taxpayers once again immediately deduct R&D expenses.
Ohio Conformity: Conforms to federal treatment and lets taxpayers immediately deduct R&D expenses.
The TCJA made bonus depreciation temporary. It was scheduled to be fully phased out by 2027. The OBBBA brought back 100% bonus depreciation and made it permanent in all future tax years.
Ohio Conformity: Conforms to 100% bonus depreciation.
While Ohio conforms to the 100% bonus depreciation, it appears it continues to decouple from the bonus depreciation with taxpayers required to add-back the amounts claimed over a period of years on their Ohio return.
The OBBBA lets taxpayers deduct 100% of the cost of qualified production property, which typically includes buildings and structural components used in manufacturing, production, or refining facilities. Prior to the OBBBA, this property was generally depreciable over 39 years.
Ohio Conformity: Conforms to 100% depreciation on qualified production property.
While Ohio couples to the new depreciation for qualified production property, it appears it continues to decouple from the bonus depreciation with taxpayers required to add-back the amounts claimed over a period of years on their Ohio return.
Since 2022, Section 163(j) limited the amount of business interest taxpayers could deduct to roughly 30% of EBIT (earnings before interest and taxes). The OBBBA sought to raise this cap by limiting deductions to roughly 30% of EBITDA instead. By adding depreciation and amortization back into the calculation, taxpayers are generally able to deduct more interest.
Ohio Conformity: Conforms to the OBBBA’s updated calculations for Section 163(j).
The OBBBA broadens the eligibility of the qualified opportunity zone (QOZ) program, which is a program that incentivizes investment into low-income areas. It lowers the investment threshold, making it easier to qualify certain projects for QOZ treatment, and it also makes the program permanent. Together, these changes give taxpayers more chances to defer, reduce, or exclude portions of their gains.
Ohio Conformity: Conforms to the OBBBA’s treatment of opportunity zones, allowing for state-level deferral, reduction, or exclusion of capital gains resulting from QOZ investment.
Prior to the OBBBA, taxpayers could exclude certain gains they realized on the sale of qualified small business stock (QSBS). The OBBBA makes it easier for stock to qualify as QSBS, giving more taxpayers the opportunity to exclude capital gains under the exclusion.
Ohio Conformity: Conforms to the OBBBA’s treatment of QSBS gains.
The OBBBA enhanced the child and dependent care credit in a few ways, like raising the income thresholds for who qualifies and increasing the percentage of expenses that count toward the credit. More taxpayers now qualify for the credit, and others will see their credit amounts increase.
Ohio Conformity: Ohio offers a similar credit — one that is based off the Federal credit. It will continue to calculate the state-level credit in this manner, effectively conforming to the federal credit.
Contributions to dependent care flexible spending accounts (FSAs) are excluded from federal income. The OBBBA raised this exclusion limit from $5,000 to $7,500.
Ohio Conformity: Conforms to the new dependent care FSA exclusion limit, effectively lowering Ohio taxable income in the process.
The OBBBA expanded the types of expenses that qualify for tax-free withdrawals, and doubled the withdrawal limit for use on K-12 expenses from $10,000 to $20,000.
Ohio Conformity: Conforms to federal 529 plan treatment, which means that Ohio also excludes eligible education-related distributions from income for state purposes.
As you can see, Ohio chose to conform to most provisions in the OBBBA. But this decision was certainly not without debate. During the legislative process, some lawmakers raised concerns that adopting certain OBBBA provisions could cut state tax revenues too drastically, and would disproportionately benefit higher earners.
Although SB 9 ultimately passed, Ohio reserves the right to revisit these conformity decisions in the future — and that’s because Ohio only conforms to federal tax treatment through legislation. Any provision not explicitly listed in SB 9 is, by default, not incorporated into state law.
The OBBBA didn’t just address income taxes; it also addressed funding for state-run safety net programs like Medicaid and Supplemental Nutrition Assistance Program (SNAP).
Medicaid: The OBBBA changed eligibility requirements for Medicaid, making it more difficult for individuals to qualify for new or maintain existing coverage. It also restricts states’ ability to use provider taxes to help offset program costs.
SNAP: The OBBBA increased cost-sharing requirements for administering SNAP, requiring most states to cover up to 75% of administrative costs (up from 50%) by 2028. It also tightened eligibility, making it more difficult for individuals to qualify for assistance.
The shortfall resulting from these budget cuts will fall on the state. Ohio must decide if it can (1) make up the shortfall for assistance programs already in place, (2) modify existing programs, or (3) reduce coverage. Legislators have already proposed solutions, though no bills have been passed that directly address these losses. We anticipate this issue will resurface during next year’s legislative section when legislators build the state’s biennial budget.
To learn more about Ohio’s response to the OBBBA or how these will affect your state tax liabilities, reach out to your Meaden & Moore advisor today.