At a Glance
The One Big Beautiful Bill Act (OBBBA) significantly changes federal tax rules beginning in 2025, but Maine, Massachusetts, and New Hampshire vary sharply in how they conform. Maine appears headed toward partial conformity, creating a dual system for depreciation, R&D, and personal deductions. Massachusetts selectively conforms—largely aligning at the corporate level but maintaining static rules for individuals. New Hampshire, tied to the 2018 IRC, adopts virtually none of OBBBA’s provisions. These differences will require businesses and taxpayers to adjust planning, recordkeeping, and compliance for 2025 and beyond.
Contents
- Maine: Partial Conformity Produces a Dual-System Environment
- Massachusetts: Targeted Adoption with Important Limitations
- New Hampshire: Little to No Conformity with OBBBA
- Looking Ahead
As the One Big Beautiful Bill Act (OBBBA) continues reshaping federal tax rules beginning in 2025, states are taking widely different approaches to conformity. Some are aligning closely with the new federal structure, others are selectively conforming, and some—particularly static-conformity states—are maintaining pre-OBBBA rules entirely.
For business owners, financial decision makers, and individual taxpayers operating in northern New England, this evolving landscape affects everything from depreciation strategies to R&D planning, interest deductibility, and personal tax benefits. Below is a practical overview of how Maine, Massachusetts, and New Hampshire currently align with OBBBA—and where major differences remain.
Maine: Partial Conformity Produces a Dual-System Environment
Maine has not yet formally enacted its response to OBBBA. Instead, the Governor has issued a letter to the State Tax Assessor outlining recommended areas of conformity and non-conformity. These recommendations provide early insight into Maine’s likely direction but do not represent final law. As written, the Governor’s guidance suggests a mixed approach that would align Maine with certain federal updates while rejecting others, potentially creating a dual-system environment for businesses and individuals.
Recommended Areas of Conformity
In her letter, the Governor recommends that Maine conform to several targeted OBBBA provisions:
- Qualified disaster losses – Election to deduct losses in either the year of occurrence or the prior year.
- Qualified farm property gains – New installment payment option for gains recognized on sales to qualifying farmers.
- Section 179 expensing – Conformity with OBBBA’s expanded limits beginning in 2025 and 2026.
- Business interest deductions – Alignment with the revised calculation based on adjusted taxable income using an EBITDA-style approach.
If adopted, these measures would deliver targeted relief and improved consistency in specific areas of business investment and recovery.
Recommended Areas of Non-Conformity (and Partial Conformity)
The Governor also recommends not conforming to several major OBBBA provisions, meaning they would not reduce Maine taxable income even though they apply federally:
- Domestic R&D expensing (Section 174A)) – Partial conformity is recommended.
- Small business taxpayers would be permitted to amend returns related to prior §174 treatment.
- However, Maine would not adopt federal treatment allowing immediate deduction of unamortized domestic R&D expenditures.
- Permanent 100% bonus depreciation and new production-property provisions
- Higher federal standard deduction
- Federal deduction for tips and overtime income (2025–2028)
- New federal senior exemption
If these recommendations become law, taxpayers benefiting from these federal provisions would not receive the same advantages on their Maine returns and may need to make upward adjustments to reconcile differences.
What This Could Mean for Maine Taxpayers
While these recommendations are not binding, they indicate that Maine may be moving toward a system where federal and state rules diverge in several key areas. If enacted as proposed:
- Businesses would need separate depreciation schedules and state-specific R&D treatment.
- Individuals would not benefit from many of OBBBA’s new personal-tax deductions at the state level.
- Additional documentation and reconciliation would be required, especially for businesses engaged in research, manufacturing, or capital-intensive operations.
Until formal legislation passes, taxpayers should treat these recommendations as a preview—not a final rulebook—and continue monitoring developments closely.
Massachusetts: Targeted Adoption with Important Limitations
Massachusetts is also a selective conformity state, but its approach differs from Maine’s in both structure and scope. Massachusetts generally conforms to the IRC on a rolling basis for corporate taxpayers but maintains a more static, state-specific framework for individuals. Recent analyses of the state’s reaction to OBBBA show that Massachusetts has adopted some federal provisions automatically while expressly decoupling from others that would significantly alter corporate or personal tax bases.
Corporate-Level Conformity
Because Massachusetts uses a more current version of the IRC for businesses, several OBBBA provisions—particularly those affecting business operations—flow into the state’s corporate excise tax unless specifically rejected. However, the state does not automatically accept all federal changes related to depreciation and incentives.
This means:
- Some federal cost-recovery enhancements, such as permanent 100% bonus depreciation, may not be incorporated for Massachusetts corporate purposes.
- Massachusetts businesses may still need state-specific depreciation adjustments, especially for property placed in service after OBBBA’s effective dates.
Industries such as manufacturing, real estate, and technology—which have closely followed federal updates on R&D expensing, production incentives, and capital investment—should be especially attentive to these differences.
Individual-Level Conformity
Massachusetts applies a more static conformity model for individuals, meaning many of OBBBA’s federal personal-tax benefits do not apply at the state level. This includes:
- Increased standard deductions
- Federal deductions for tips and overtime pay
- New senior income exemptions
As a result, federal tax savings will not translate into lower state income tax for Massachusetts residents in these categories.
New Hampshire: Little to No Conformity with OBBBA
New Hampshire’s tax structure produces the most significant divergence from OBBBA among the three states. Because the state adheres to a static conformity model tied to the IRC as of December 31, 2018, none of OBBBA’s 2025 changes—including depreciation, interest limitation updates, production incentives, or R&D expensing—flow into either the Business Profits Tax (BPT) or the Business Enterprise Tax (BET).
New Hampshire’s Additional Decoupling
In some areas, New Hampshire has moved even further away from current federal rules. A recent statutory change allows full deductibility of interest previously limited under federal Section 163(j) and requires add-backs when that interest is later deducted federally. This means:
- OBBBA’s revised 163(j) rules have no effect on New Hampshire calculations.
- Businesses with leveraged capital structures will see very different outcomes between their federal and New Hampshire filings.
Individual Taxpayer Considerations
With the Interest & Dividends Tax fully repealed after 2024, most OBBBA personal-tax changes—such as expanded standard deductions and new temporary benefits for tips and overtime—have no impact on New Hampshire residents.
What This Means for New Hampshire Taxpayers
New Hampshire businesses should expect the widest gap between their federal and state results. Separate recordkeeping is essential, and multi-state businesses must ensure that New Hampshire’s significantly older IRC reference is incorporated correctly into planning and software systems.
Looking Ahead
The OBBBA has created the most substantial federal tax overhaul in years—but its impact varies dramatically at the state level. Maine, Massachusetts, and New Hampshire each reflect a distinct approach: partial adoption, selective conformity, and non-conformity, respectively. For businesses and individuals alike, these differences affect investment decisions, depreciation strategies, research activities, personnel budgeting, and long-term tax planning. Failing to account for state-level divergence can lead to unexpected tax liabilities, missed opportunities, and compliance challenges. Whether you operate in one of these states or across all three, a knowledgeable tax advisor can help you evaluate your specific situation and develop a proactive plan.
Nick Lagoditz, CPA, joined ARB in 2016 as an associate and became a tax manager in 2022. He provides tax preparation and business advisory services, with a focus on partnerships, real estate professionals, and construction businesses. Previous to ARB, Nick worked at a large international firm for nearly two years.
