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1 Jared Walczak, Toward a State of Conformity: State Tax Codes a Year after Federal Tax Reform 1 (2019)

handle is hein.taxfoundation/twscfty0001 and id is 1 raw text is: FISCAL FACT No. 631 Jan. 2019 The Tax Foundation is the nation's leading independent tax policy research organization. Since 1937, our research, analysis, and experts have informed smarter tax policy at the federal, state, and local levels. We are a 501(c)(3) nonprofit organization. ©2019 Tax Foundation Distributed under Creative Commons CC BY NC 4.0 Editor, Rachel Shuster Designer, Dan Carvajal Tax Foundation 1325 G Street, NW, Suite 950 Washington, DC 20005 202.464.6200 taxfoundation.org Toward a State of Conformity: State Tax Codes a Year After Federal Tax Reform Jared Walczak Senior Policy Analyst Key Findings States incorporate provisions of the federal tax code into their own codes in varying degrees, meaning that federal tax reform has implications for state revenue beyond any broader economic effects of tax reform. Because the base-broadening provisions of the new federal tax law often flow through to states, while the corresponding rate reductions do not, most states experienced a revenue increase. The vast majority of filers will receive a tax cut at the federal level, but due to state inaction in many cases, they may face tax increases at the state level. Seven states have yet to update their conformity statutes to a post-tax reform version of the Internal Revenue Code (IRC). Of these, Arizona, California, Minnesota, and Virginia conform to outdated versions of the IRC for both individual and corporate tax purposes, while Massachusetts has failed to update only its individual income tax conformity, and Florida and New Hampshire are out of date for corporate tax purposes. Sixteen states conform to an important pro-growth element of federal tax reform, the provision providing for immediate expensing of investments in machinery and equipment. Another three states conform with partial addbacks. State responses to international tax provisions, particularly those pertaining to the inclusion of Global Intangible Low-Taxed Income (GILTI), remain substantially unresolved. The taxation of GILTI would represent an uncompetitive departure from typical approaches to state taxation and raises constitutional issues in many states. States receiving additional revenue should view this as an opportunity to make their tax codes more competitive. In the past, federal tax reform initiated a round of state tax reform as well, and this process tends to last several years

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