From Capitol Hill to Harrisburg: The Effects of the One Big Beautiful Bill Act on Pennsylvania

State and Local Tax (SALT) attorneys Jennifer Karpchuk and Olivia Klein co-authored a column for The Legal Intelligencer exploring how Pennsylvania is responding to the federal One Big Beautiful Bill Act (OBBBA) through its fiscal year 2026 budget (Act 45). Because Pennsylvania conforms on a rolling basis to the Internal Revenue Code (IRC) for purposes of the corporate net income tax (CNIT), the Commonwealth would ordinarily adopt federal changes such as those instituted under the OBBBA automatically. The authors explain that Act 45 decouples from three key provisions: renewed immediate deduction for research and experimental (R&E) expenditures under IRC Section 174, 100 percent depreciation for qualified production property under IRC Section 168(n) and the OBBBA's change to the business interest limitation under IRC Section 163(j) from earnings before interest and taxes (EBIT) to earnings before interest, taxes, depreciation and amortization (EBITDA). The article highlights practical implications for taxpayers, including the need to model Pennsylvania-specific addbacks and deductions and determine whether separate CNIT tracking will be required.

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