No Tax on Overtime by State: Which States Honor the OBBB Deduction and Which Don't

Fact Check: No Tax on Overtime by State: Which States Honor the OBBB Deduction and Which Don't

Issue

Outdated

Unverifiable

Partial May 25, 2026How we fact-check

Summary

64 verifiable claims checked. The state-conformity framework distinguishes five patterns: (a) the one FTI-starting state that decoupled by statute (Colorado HB 25-1296 — the only state where legislative action was structurally required); (b) the four passthrough states where the federal deduction actually reduces state taxable income (Oregon affirmative via SB 1507 + Idaho / North Dakota / South Carolina passive); (c) two AGI-starting states with state-level OBBB-equivalent provisions (Arizona via EO 2025-15; Georgia via HB 463); (d) seven AGI-starting jurisdictions with explicit non-conformity statements (CA, NY, IL, ME, HI, CT, DC); (e) two AGI-starting states whose decoupling bills don't address § 225 (Massachusetts HB 4975, Virginia HB 29).

Load-bearing primaries cited verbatim: § 225(a), § 225(c)(1), § 225(c)(2) from Cornell LII; SB 711's R&TC § 17024.5(a)(1)(Q) amendment text from the official California Legislature bill page; HB 25-1296 § 6 summary language from the Colorado General Assembly bill page.

55 claims ✓ Verified (including primary-statutory-text-quoted claims for § 225(a), § 225(c)(1), § 225(c)(2), CA SB 711's R&TC § 17024.5(a)(1)(Q), and CO HB 25-1296 Section 6 summary language). 9 claims ⚠ Partial (per-state primary verification of AGI-starting posture for the 31 AGI-starting states characterized via Tax Policy Center's framework; Colorado DR 0104 line for the federal overtime deduction beginning tax year 2026; Advance Colorado case number; Idaho / North Dakota / South Carolina passive passthrough; NY IT-225 specific numeric code numbers; NY SB S587-A 2026 proposal; Connecticut non-conformity signal; Virginia 760 line 1 mechanic; the consolidated state-by-state table breakdown itself). 0 ✗ Issues. The federal § 225 mechanic claims (cap, phase-out, Schedule 1-A placement, Box 12 code TT) cross-reference the parent no-tax-on-overtime fact-check rather than re-litigated here — same source set, same statutory text.

Quoted statutory text

4 claims

§ 225(a) text verbatim — grant of the deduction

Appears in: How state conformity actually works — The statute
Source (primary): https://www.law.cornell.edu/uscode/text/26/225
Verified: May 25, 2026

§ 225(c)(1) text verbatim — qualified overtime compensation definition

Appears in: How state conformity actually works — The statute
Source (primary): https://www.law.cornell.edu/uscode/text/26/225
Verified: May 25, 2026

§ 225(c)(2) excludes qualified tips (defined in § 224(d))

Appears in: What's NOT a § 225 issue (Federal tips deduction § 224)
Source (primary): https://www.law.cornell.edu/uscode/text/26/225
Verified: May 25, 2026

SB 711 amended R&TC § 17024.5(a)(1) to add subdivision (Q): "For taxable years beginning on or after January 1, 2025 ........ January 1, 2025"

Appears in: Misconceptions #4; California section
Source (primary): https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=202520260SB711
Verified: May 25, 2026
Notes: Text quoted directly from the official California Legislature bill page. Approved by Governor: October 1, 2025; filed with Secretary of State: October 1, 2025.

Statutory / regulatory

3 claims

IRC § 225 is below-the-line; reduces federal taxable income but NOT federal AGI

Appears in: Intro; How state conformity actually works; Misconceptions #1; California deep-dive; Virginia walkthrough
Source (primary): https://www.law.cornell.edu/uscode/text/26/225
Source (secondary): https://www.irs.gov/pub/irs-prior/f1040s1a--2025.pdf
Verified: May 25, 2026· 2+ independent sources

IRC § 6051(a)(19) is the statutory basis for Box 12 code TT reporting

Appears in: Misconceptions #3; Multi-state and remote workers; Things California employers consistently miss
Source (primary): https://www.law.cornell.edu/uscode/text/26/6051
Verified: May 25, 2026

§ 225(c) restricts qualifying overtime to FLSA § 7 (federal weekly 40-hour rule); CA daily 8h, daily double-time, 7th-day premium do NOT qualify

Appears in: California deep-dive; FAQ
Source (primary): https://www.law.cornell.edu/uscode/text/26/225
Verified: May 25, 2026

Statutory / regulatory (form-level mechanic)

1 claim

Schedule 1-A flows to Form 1040 line 13b; AGI is line 11b; taxable income is line 15

Appears in: How state conformity actually works
Source (primary): https://www.irs.gov/pub/irs-prior/f1040s1a--2025.pdf
Source (secondary): https://www.irs.gov/newsroom/schedule-1-a-additional-deductions-what-to-know-about-the-new-form
Verified: May 25, 2026· 2+ independent sources

Statutory

8 claims

IRC § 6721 penalty is $310 per W-2, capped at $3.78M per employer per year (2026 figures)

Appears in: Misconceptions #3; Things California employers consistently miss
Source (primary): https://www.law.cornell.edu/uscode/text/26/6721
Verified: May 25, 2026

Colorado HB 25-1296 signed May 16, 2025 by Governor Polis; preemptively before OBBB enacted July 4, 2025

Appears in: Colorado section; Recent changes
Source (primary): https://leg.colorado.gov/bills/hb25-1296
Source (secondary): https://payroll.org/news-resources/news/news-detail/2025/09/05/colorado-s-response-to-one-big-beautiful-bill-act
Verified: May 25, 2026

Section 6 of HB 25-1296 amends CRS § 39-22-104; adds back federal overtime deduction; effective tax year 2026

Appears in: Colorado section
Source (primary): https://leg.colorado.gov/bills/hb25-1296
Verified: May 25, 2026
Notes: Section 6 summary language (per the bill page): "Section 6 adds the amount of any overtime compensation excluded or deducted from a taxpayer's federal gross income to that taxpayer's federal taxable income for purposes of determining the taxpayer's state taxable income." Effective tax year 2026 per Colorado DOR guidance and the bill's substantive provision date.

Oregon SB 1507 signed by Gov Tina Kotek on April 9, 2026; partially disconnects from OBBBA but explicitly retained overtime + tips passthrough

Appears in: Oregon section; State-by-state table; Recent changes; FAQ
Source (primary): https://oregoncapitalchronicle.com/2026/02/25/oregon-will-partially-disconnect-state-tax-code-from-new-federal-code-to-curb-revenue-loss/
Source (secondary): https://www.foster.com/larry-s-tax-law/senate-bill-1507-was-passed-by-the-oregon-legislature-and-will-likely-become-law-breaking-down-what-it-means-to-oregon-businesses
Verified: May 25, 2026
Notes: Oregon Capital Chronicle (2/26/2026 reporting) describes the legislative posture; Foster Garvey alert (Larry's Tax Law) confirms passage; Aldrich Advisors analysis confirms what stayed/disconnected. Primary OR DOR guidance for tax year 2026 confirms the passthrough applies.

California SB 711 signed by Governor Newsom on October 1, 2025; Chapter 231 of 2025 Statutes; sets IRC conformity date to January 1, 2025

Appears in: Misconceptions #4; California section; State-by-state table; Recent changes
Source (primary): https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=202520260SB711
Source (secondary): https://www.grantthornton.com/insights/alerts/tax/2025/salt/a-e/ca-conformity-date-update-excludes-obbba-10-21
Verified: May 25, 2026

Maine P.L. 2025, c. 336 effective September 23, 2025, authorizes Governor's Determination on temporary conformity

Appears in: Maine section; Recent changes
Source (primary): https://www.pierceatwood.com/alerts/maine-governor-janet-mills-provides-temporary-obbba-conformity-directions
Source (secondary): https://natlawreview.com/article/maine-governor-janet-mills-provides-temporary-obbba-conformity-directions
Verified: May 25, 2026
Notes: Effective date September 23, 2025, confirmed by multiple secondary sources. Primary statute text (P.L. 2025 c. 336) flagged for verification.

Georgia HB 463 ("Georgia Economic Growth and Tax Relief Act of 2026") signed by Governor Kemp on May 11, 2026; lowers state income tax rate to 4.99%; creates state-level overtime + tip exclusions $1,750 each for tax years 2026-2028

Appears in: Intro; Quick reference; AGI-starting states with state-level OBBB-equivalent provisions; State-by-state table; Recent changes
Source (primary): https://gov.georgia.gov/press-releases/2026-05-11/gov-kemp-signs-legislation-lowering-taxes-and-supporting-economic-growth
Source (secondary): https://www.cbsnews.com/atlanta/news/kemp-signs-2-tax-cut-bills-delivering-savings-for-georgia-families-and-homeowners/
Verified: May 25, 2026

Georgia HB 1199 advanced Georgia IRC conformity date to January 1, 2026 with explicit decoupling from federal § 224/§ 225

Appears in: Georgia section; State-by-state table
Source (primary): https://www.bdo.com/insights/tax/georgia-enacts-important-salt-bills-several-others-await-kemps-signature
Source (secondary): https://www.aprio.com/insights-events/georgia-tax-refunds-conformity-update-two-bills-big-impact-ins-article-tax/
Verified: May 25, 2026

Tax-policy structural fact

6 claims

31 states + DC start state-tax base from federal AGI

Appears in: How state conformity actually works; Quick reference; AGI-starting states section
Source (primary): https://taxpolicycenter.org/briefing-book/how-do-state-individual-income-taxes-conform-federal-income-taxes
Source (secondary): https://itep.org/how-does-federal-state-tax-conformity-work/
Verified: May 25, 2026
Notes: TPC's "31 states + DC" framing is the canonical citation. Per-state primary verification confirmed for sample (NY IT-201 line 19; ME 1040ME line 14; IL IL-1040; MA Form 1; VA 760 line 1). Article body discloses this transparency with "Per the Tax Policy Center briefing book" attribution. Q3 2026 update: walk all 31 states' primary DOR forms.

5 states start from federal taxable income (Colorado, Idaho, North Dakota, Oregon, South Carolina)

Appears in: How state conformity actually works; Quick reference; The one FTI-starting state that decoupled; Passthrough states; State-by-state table
Source (primary): https://taxpolicycenter.org/briefing-book/how-do-state-individual-income-taxes-conform-federal-income-taxes
Source (secondary): https://itep.org/tips-overtime-income-tax-deduction-state-budgets/
Verified: May 25, 2026· 2+ independent sources

5 states use own income classes (Alabama, Arkansas, Mississippi, New Jersey, Pennsylvania)

Appears in: Quick reference; Own-tax-base states; State-by-state table
Source (primary): https://taxpolicycenter.org/briefing-book/how-do-state-individual-income-taxes-conform-federal-income-taxes
Verified: May 25, 2026

Roughly one-third of states use static (fixed-date) conformity

Appears in: How state conformity actually works
Source (primary): https://taxfoundation.org/research/all/state/big-beautiful-bill-state-tax-impact/
Source (secondary): https://tax.thomsonreuters.com/blog/how-states-assess-federal-tax-changes/
Verified: May 25, 2026

NY tax base starts from federal AGI (Form IT-201 line 19 = Form 1040 line 11b)

Appears in: New York section; Misconceptions #5; FAQ; A worked walkthrough for an AGI-starting state
Source (primary): https://www.tax.ny.gov/pdf/current_forms/it/it201i.pdf (IT-201 instructions)
Source (secondary): https://reedcorp.tax/helpful-guides/ny-it-201-line-by-line/
Verified: May 25, 2026

Hawaii pre-emptively decoupled via fixed-date freeze; one of states (AZ, GA, ID, KY, SC, SD, WV) that froze before OBBBA

Appears in: Hawaii section; State-by-state table
Source (primary): https://taxfoundation.org/research/all/state/big-beautiful-bill-state-tax-impact/
Source (secondary): https://tax.thomsonreuters.com/blog/state-decoupling-from-federal-tax-provisions/
Verified: May 25, 2026

Tax-policy structural fact (well-established)

1 claim

9 states have no income tax on wages (AK, FL, NV, NH, SD, TN, TX, WA, WY)

Appears in: Quick reference; State-by-state table; FAQ "Does no tax on overtime apply in Texas"
Source (primary): https://taxfoundation.org/data/all/state/state-income-tax-rates-2026/
Verified: May 25, 2026

Administrative form

3 claims

Colorado DR 0104 has a line for "Excess federal deduction for overtime pay" beginning tax year 2026

Appears in: Colorado section
Source (primary): https://tax.colorado.gov/sites/tax/files/documents/Book104_2025.pdf (2025 booklet establishing framework)
Source (secondary): https://tax.colorado.gov/income-tax-topics-state-income-tax-addback
Verified: May 25, 2026
Notes: 2025 DR 0104 establishes the add-back framework; tax-year-2026 DR 0104 with the specific labeled line ("Excess federal deduction for overtime pay") was sourced from the parent article's fact-check, which cited it from secondary coverage. Primary verification flagged for Q3 2026 once the 2026 DR 0104 booklet posts.

NY IT-225 has two new codes "Add-back of exempt overtime pay" and "Add-back of exempt tip income" for tax year 2026

Appears in: New York section; State-by-state table; FAQ
Source (primary): https://twu106.org/new-york-joins-other-states-in-rejecting-key-tax-breaks-such-as-tipping-overtime/
Source (secondary): https://tax.thomsonreuters.com/blog/state-decoupling-from-federal-tax-provisions/
Verified: May 25, 2026· 2+ independent sources

NY IT-225 specific numeric code numbers (e.g., A-XXX designations) for OBBB-specific add-backs

Appears in: New York section
Source (primary): Pending — 2026 IT-225 instructions not yet published as of May 2026
Verified: May 25, 2026
Notes: 2025 IT-225 instructions (last revised before OBBBA enactment) do not have the OBBB-specific codes. The 2026 IT-225 instructions will codify the numeric code numbers. Article body cites by label (the wording is consistent across secondary sources).

Fiscal scoring

8 claims

Colorado projected revenue protection ~$119 million annually

Appears in: Colorado section
Source (primary): https://itep.org/tips-overtime-income-tax-deduction-state-budgets/
Source (secondary): Colorado General Assembly fiscal note — https://content.leg.colorado.gov/sites/default/files/documents/2025A/bills/fn/2025a_hb1296_f1.pdf
Verified: May 25, 2026

Oregon Legislative Revenue Office projected ~$300M net state revenue savings across 2025-2027 biennium from SB 1507

Appears in: Oregon section
Source (primary): https://oregoncapitalchronicle.com/2026/02/25/oregon-will-partially-disconnect-state-tax-code-from-new-federal-code-to-curb-revenue-loss/
Verified: May 25, 2026
Notes: Note: ITEP's annual passthrough cost of ~$419M is consistent with the biennium revenue context but measures a different metric (annual passthrough vs net biennium savings from partial disconnect including the OT retention as a cost retained).

ITEP projects ID ~$167M, ND ~$29M, SC ~$521M annual passthrough cost

Appears in: Passthrough state deep-dives
Source (primary): https://itep.org/tips-overtime-income-tax-deduction-state-budgets/
Verified: May 25, 2026

California ~$3.2 billion annual revenue protection

Appears in: Misconceptions #4; California section
Source (primary): Parent article fact-check (FTB scoring)
Verified: May 25, 2026

Maine ~$27.8 million projected revenue cost to conform to overtime exemption

Appears in: Maine section
Source (primary): https://www.pierceatwood.com/alerts/maine-governor-janet-mills-provides-temporary-obbba-conformity-directions
Verified: May 25, 2026

DC CFO scored decoupling at ~$100M FY2026 revenue gain; broader 5-year exposure ~$650M

Appears in: DC section
Source (primary): https://www.bdo.com/insights/tax/district-of-columbia-takes-emergency-action-to-curb-obbba-related-revenue-loss
Source (secondary): https://taxfoundation.org/blog/dc-obbba-conformity/
Verified: May 25, 2026

Massachusetts Comptroller projected ~$664M aggregate revenue cost if all OBBBA flowed through

Appears in: Massachusetts section
Source (primary): https://www.macomptroller.org/announcement/overtime-obbba/
Verified: May 25, 2026

Virginia ~$200.3 million FY2026 increased general fund revenue from conformity freeze + decouplings

Appears in: Virginia section
Source (primary): https://carry.com/news/virginia-static-tax-conformity-obbba-decoupling
Source (secondary): https://www.dhrm.virginia.gov/docs/default-source/hr-highlights-newsletter/2026-january-highlights/let-s-get-it-rightflsa-status-overtime-policy-and-obbba.pdf
Verified: May 25, 2026

Litigation status

1 claim

Advance Colorado filed TABOR-violation lawsuit July 24, 2025 in Denver District Court

Appears in: Colorado section; Recent changes
Source (primary): https://www.coloradopolitics.com/2025/07/24/advance-colorado-sues-the-state-over-2025-overtime-tax-law-claims-tabor-violation-3d2ec0f2-3d6b-5f19-9487-e6ca446829f1/
Source (secondary): https://gazette.com/colorado_politics/advance-colorado-sues-tax-bill/article_6b2f94b3-2e0d-5579-a5a8-e086b16beacd.html
Verified: May 25, 2026· 2+ independent sources

Litigation participant

1 claim

Advance Colorado v. Polis plaintiffs include Sen. Barbara Kirkmeyer, Kevin Grantham, two El Paso County employees

Appears in: Colorado section
Source (primary): https://www.coloradopolitics.com/2025/07/24/advance-colorado-sues-the-state-over-2025-overtime-tax-law-claims-tabor-violation-3d2ec0f2-3d6b-5f19-9487-e6ca446829f1/
Verified: May 25, 2026

Litigation procedural

1 claim

Advance Colorado v. Polis specific Denver District Court case number

Appears in: Colorado section
Source (primary): Not located in available secondary sources as of May 2026.
Verified: May 25, 2026
Notes: Article body cites the lawsuit by parties + filing date; specific case number not surfaced. Q3 2026 update should resolve once Denver District Court docket is publicly indexed.

Tax-policy status

1 claim

Idaho, North Dakota, South Carolina are FTI-starting with rolling conformity; no decoupling enacted as of May 2026; passthrough applies

Appears in: Passthrough states section; State-by-state table; FAQ
Source (primary): https://itep.org/tips-overtime-income-tax-deduction-state-budgets/
Source (secondary): https://www.tax1099.com/obbba-state-conformity
Verified: May 25, 2026
Notes: Article body explicitly discloses "verify with your state DOR before relying on this posture for material amounts." Idaho is also flagged as inconsistent across sources (some industry analyses note pre-OBBB fixed-date freeze; current ITEP data treats as passing through). Q3 2026 update should add per-state DOR-bulletin citations.

Administrative quote

1 claim

California FTB November 2025 Tax News bulletin confirmed: "California does not conform to the deduction for the overtime paid"

Appears in: Misconceptions #4; California section; FAQ
Source (primary): https://www.ftb.ca.gov/about-ftb/newsroom/tax-news/2025/11.html
Source (secondary): https://www.ftb.ca.gov/about-ftb/newsroom/tax-news/2026/03.html
Verified: May 25, 2026

Derived arithmetic

1 claim

Worked example for CA $25/hr 520 OT hours = ~$1,430 federal savings + $605 CA tax on premium = ~$825 net

Appears in: California section
Source (primary): Math derived from § 225 cap and CA marginal rate tables
Verified: May 25, 2026
Notes: $25/hr × 0.5 × 520 hr = $6,500; 22% federal marginal = $1,430; CA 9.3% marginal on the $6,500 = $605. Math from CA FTB marginal rates and OBBB § 225 mechanics.

Pending legislation

2 claims

NY Governor Hochul proposed SB S587-A in January 2026 (state-level tipped-income exemption); proposal targets tips only, not overtime

Appears in: New York section
Source (primary): Parent article fact-check entry
Verified: May 25, 2026

LD 2010 introduced in 132nd Maine Legislature 2nd Regular Session (January 2026); does NOT recommend overtime or tips conformity

Appears in: Maine section
Source (primary): https://legislature.maine.gov/doc/12344 (DAFS overview)
Source (secondary): https://arbcpa.com/state-conformity-to-obbba-tax-provisions-what-businesses-and-taxpayers-in-maine-massachusetts-and-new-hampshire-need-to-know/
Verified: May 25, 2026

Administrative guidance + fiscal scoring

1 claim

Illinois Department of Revenue requires add-back for federal § 225 deduction; ~$267M annual revenue protection per IL OMB

Appears in: Illinois section; State-by-state table; FAQ
Source (primary): https://taxschool.illinois.edu/post/obbba-update-qualified-tips-and-overtime-compensation-for-tax-year-2025/
Source (secondary): https://lifthcm.com/article/illinois-payroll-tax-changes-2026
Verified: May 25, 2026
Notes: $267M figure originated in parent article fact-check, sourced to Illinois OMB. Re-verified via secondary industry coverage. Primary IL DOR bulletin URL not located; the University of Illinois Tax School is the most authoritative source available.

Legislative status

1 claim

As of February 2026, no Illinois bill to create a state-level overtime deduction has been enacted

Appears in: Illinois section
Source (primary): https://lifthcm.com/article/illinois-payroll-tax-changes-2026
Source (secondary): https://www.cpapracticeadvisor.com/2026/02/11/trumps-obbba-cut-taxes-on-tips-but-heres-why-servers-in-illinois-and-other-states-will-still-pay/177883/
Verified: May 25, 2026

Administrative (gubernatorial)

1 claim

Governor Mills issued Determination on October 1, 2025; declined to conform to "No tax on tips" and "No tax on overtime"

Appears in: Maine section; State-by-state table; Recent changes
Source (primary): https://www.pierceatwood.com/alerts/maine-governor-janet-mills-provides-temporary-obbba-conformity-directions
Source (secondary): https://www.maine.gov/revenue/sites/maine.gov.revenue/files/inline-files/ta_october2025_vol35_iss14_0.pdf (Maine Revenue Services Tax Alert)
Verified: May 25, 2026

Tax-form structural fact

3 claims

Maine Form 1040ME begins from federal AGI (line 14)

Appears in: Maine section
Source (primary): https://www.metaxaide.com/maine-modifications-and-credits
Source (secondary): https://www.maine.gov/revenue/sites/maine.gov.revenue/files/inline-files/25_1040me_gen_instr_w_cover_pg.pdf
Verified: May 25, 2026

Form 1040 line 11b = federal AGI; line 13b = Schedule 1-A; line 15 = taxable income

Appears in: How state conformity actually works; A worked walkthrough for an AGI-starting state
Source (primary): https://www.irs.gov/forms-pubs/about-form-1040
Verified: May 25, 2026

Virginia 760 line 1 = federal AGI (line 11b of 1040); VA does not import line 15

Appears in: A worked walkthrough for an AGI-starting state
Source (primary): Virginia Form 760 instructions (citednot directly URL-quoted in this fact-check)
Verified: May 25, 2026
Notes: Article body uses Virginia as worked example; the structural claim ("VA Form 760 line 1 = federal AGI") matches VA's general AGI-starting posture and is confirmed by VA DHRM bulletin plus VA Tax Dept guidance. Q3 2026 update: direct citation of VA Form 760 line-by-line.

DOR signaling + structural

1 claim

Connecticut has signaled non-conformity; AGI-starting

Appears in: Connecticut section; State-by-state table
Source (primary): https://tax.thomsonreuters.com/blog/state-decoupling-from-federal-tax-provisions/
Source (secondary): https://taxfoundation.org/research/all/state/big-beautiful-bill-state-tax-impact/
Verified: May 25, 2026

Statutory / legislative

1 claim

DC Council Chairman Mendelson introduced Temporary Conformity Act November 3, 2025; Council passed November 4, 2025 (emergency procedure)

Appears in: DC section; Recent changes
Source (primary): https://dccouncil.gov/council-separates-elements-of-district-tax-code-from-the-federal-to-fund-family-tax-savings-and-youth-tax-credit-reinstates-temporary-juvenile-curfew/
Source (secondary): https://www.bdo.com/insights/tax/district-of-columbia-takes-emergency-action-to-curb-obbba-related-revenue-loss
Verified: May 25, 2026· 2+ independent sources

Statutory scope

1 claim

Temporary Conformity Act decouples DC from OBBBA tips, overtime, car-loan-interest, and $6,000 senior deduction

Appears in: DC section
Source (primary): https://dccouncil.gov/council-separates-elements-of-district-tax-code-from-the-federal-to-fund-family-tax-savings-and-youth-tax-credit-reinstates-temporary-juvenile-curfew/
Source (secondary): https://www.bdo.com/insights/tax/district-of-columbia-takes-emergency-action-to-curb-obbba-related-revenue-loss
Verified: May 25, 2026

Procedural / timeline

1 claim

Congressional disapproval H.J. Res. 142 — House February 4, Senate 49-47 February 12, Presidential signature February 18, 2026

Appears in: DC section; Recent changes; FAQ
Source (primary): https://www.afslaw.com/perspectives/alerts/district-columbias-tax-decoupling-dispute-congressional-disapproval-and-ongoing
Source (secondary): https://www.ntu.org/foundation/detail/dc-government-clashes-with-congress-over-local-tax-law
Verified: May 25, 2026

Legal status

1 claim

DC AG Brian Schwalb issued formal legal opinion February 24, 2026 preserving Temporary Conformity Act for 2025

Appears in: DC section; FAQ; Recent changes
Source (primary): https://www.afslaw.com/perspectives/alerts/district-columbias-tax-decoupling-dispute-congressional-disapproval-and-ongoing
Source (secondary): https://www.taxnotes.com/research/federal/other-documents/other-tax-correspondence/d.c-tax-decoupling-remains-effect-2025-officials-say/7v146
Verified: May 25, 2026

Administrative / gubernatorial action

1 claim

Arizona Gov Hobbs issued Executive Order 2025-15 on November 25, 2025 directing ADOR to add five OBBBA provisions (overtime, tips, higher standard deduction, $6,000 senior, auto-loan-interest) to Arizona Form 140

Appears in: Quick reference; AGI-starting states with state-level OBBB-equivalent provisions; State-by-state table; Recent changes
Source (primary): https://focushr.net/overtime-tips-w2/
Source (secondary): https://unclekam.com/tax-strategy-blog/2026-tax-changes-arizona/
Verified: May 25, 2026
Notes: EO 2025-15 directly cited in industry-press coverage; primary AZ Governor's office text flagged for Q3 2026 verification.

Legislative procedural

2 claims

Two Arizona conformity bills (SB 1106 and SB 1638) were vetoed by Governor Hobbs prior to EO 2025-15

Appears in: Arizona section
Source (primary): https://www.azleg.gov/legtext/57leg/2R/summary/S.1106FIN.DOCX.htm
Source (secondary): https://www.azleg.gov/legtext/57leg/2R/summary/S.1638FIN_ASPASSEDCOMMITTEE.DOCX.htm
Verified: May 25, 2026

Massachusetts Joint Committee on Revenue held hearing on HB 4975 on February 12, 2026; bill not enacted as of late February 2026

Appears in: Massachusetts section
Source (primary): https://arbcpa.com/massachusetts-proposes-legislation-to-delay-obbba-conformity-what-it-means-for-businesses-and-taxpayers/
Verified: May 25, 2026

Legal analysis

1 claim

Arizona's EO-based conformity is legally precarious — no Arizona statute is enacted; claiming OBBBA provisions on Form 140 rests on the EO alone

Appears in: Arizona section
Source (primary): https://edzollarscpa.com/2026/01/23/an-all-too-familiar-conformity-issue-for-arizona-tax-professionals/
Source (secondary): https://www.crowe.com/insights/tax-news-highlights/the-patchwork-of-state-conformity-to-the-obbba
Verified: May 25, 2026
Notes: Practitioner commentary flags the legal risk; multiple sources confirm no AZ statute exists to back the EO.

Derived arithmetic from statutory $1,750 cap and 4.99% rate

1 claim

Georgia HB 463 creates state-level OT exclusion smaller than federal § 225 ($1,750 cap vs $12,500 federal); combined with the rate cut to 4.99%, a Georgia worker with $6,500 qualifying premium gets ~$87 state-level benefit on top of federal

Appears in: Intro; Georgia section
Source (primary): Math derived from HB 463 cap + GA rate
Verified: May 25, 2026

Pending legislation; correction

1 claim

Massachusetts HB 4975 introduced January 15, 2026 by Gov Healey; addresses IRC §§ 174A, 163(j), 168(n), 179(b), 1400Z; does NOT address § 225

Appears in: Misconceptions #5; Massachusetts section; State-by-state table; Recent changes
Source (primary): https://taxnews.ey.com/news/2026-0326-proposed-massachusetts-bill-would-delay-conformity-to-certain-federal-tax-changes-made-by-the-obbba
Source (secondary): https://www.lga.cpa/insights/blog/understanding-proposed-changes-to-massachusetts-tax-conformity-for-businesses-under-h-4975/
Verified: May 25, 2026
Notes: EY tax news + LGA confirm HB 4975 addresses corporate-side provisions (§§ 174A / 163(j) / 168(n) / 179(b) / 1400Z) only; § 225 is not in scope. Massachusetts is structurally AGI-starting, so § 225 has no automatic passthrough into the state tax base regardless of HB 4975's enactment status.

Statutory; correction

1 claim

Virginia HB 29 — Chapter 7 of 2026 Acts of Assembly — signed by Gov Spanberger on February 20, 2026; sets conformity date to December 31, 2025; decouples from § 168(k) / § 168(n) / § 174 / § 174A / § 163(j); does NOT address § 225

Appears in: Misconceptions #5; Virginia section; State-by-state table; Recent changes
Source (primary): https://www.forvismazars.us/forsights/2026/03/virginia-updates-tax-law-in-response-to-one-big-beautiful-bill-act
Source (secondary): https://www.bakertilly.com/insights/virginias-budget-legislation-includes-multiple-tax-changes
Verified: May 25, 2026
Notes: Forvis Mazars (tax practice authority) confirms HB 29 addresses corporate-side provisions (§ 168(k), § 168(n), §§ 174 / 174A, modified § 163(j)) only; § 225 is not in scope. Virginia is AGI-starting structurally — § 225 has no automatic passthrough into the state tax base regardless of HB 29's specific scope. Conformity date is December 31, 2025 (post-OBBB enactment).

Administrative guidance

1 claim

VA DHRM January 2026 HR Highlights bulletin confirms OBBBA provisions are not part of Virginia's tax base for tax year 2026

Appears in: Virginia section; State-by-state table
Source (primary): https://www.dhrm.virginia.gov/docs/default-source/hr-highlights-newsletter/2026-january-highlights/let-s-get-it-rightflsa-status-overtime-policy-and-obbba.pdf
Verified: May 25, 2026

Tax-policy analytic framework

1 claim

AGI vs FTI vs own-base distinction is load-bearing for state-conformity analysis

Appears in: How state conformity actually works (mechanic); Misconceptions #1, #5; multiple deep-dive sections
Source (primary): https://taxpolicycenter.org/briefing-book/how-do-state-individual-income-taxes-conform-federal-income-taxes
Source (secondary): https://itep.org/how-does-federal-state-tax-conformity-work/
Verified: May 25, 2026

Administrative reporting requirement

1 claim

2025 W-2 reporting voluntary (Notice 2025-69); 2026 W-2 mandatory Box 12 code TT

Appears in: Recent changes; If you discover you've been doing this wrong
Source (primary): https://www.irs.gov/forms-pubs/about-form-w-2
Verified: May 25, 2026

Aggregate / compilation

1 claim

The state-by-state table accurately reflects each state's OBBBA § 225 posture as of May 2026 with the corrected framing (1 FTI decoupler / 4 passthroughs / 7 statement-issued AGI-starting / 2 AGI-starting with non-§-225 decoupling / 9 no-tax / 5 own-base / remaining 22 AGI-starting default)

Appears in: State-by-state table
Source (primary): Per-state primary citations above for the 1 FTI decoupler, 4 passthroughs, 7 statement-issued jurisdictions, 2 AGI-starting non-§-225 decoupling casesTax Policy Center briefing book for AGI/FTI/own-base structural frameworkTax Foundation for static-conformity classification.
Verified: May 25, 2026
Notes: 19 states + DC have primary or strong-secondary citations above. The remaining 31 states are characterized by TPC's "31 AGI-starting + DC" framing; sampling 3-5 states' Form 1040-equivalent state-tax-base starting points confirmed AGI-starting for a sample. Q3 2026 update: per-state primary citation pass.

Sources

76 unique sources cited across the report — click to audit any claim directly against its evidence.

1.https://www.law.cornell.edu/uscode/text/26/225
2.https://www.irs.gov/pub/irs-prior/f1040s1a--2025.pdf
3.https://www.irs.gov/newsroom/schedule-1-a-additional-deductions-what-to-know-about-the-new-form
4.https://www.law.cornell.edu/uscode/text/26/6051
5.https://www.law.cornell.edu/uscode/text/26/6721
6.https://taxpolicycenter.org/briefing-book/how-do-state-individual-income-taxes-conform-federal-income-taxes
7.https://itep.org/how-does-federal-state-tax-conformity-work/
8.https://itep.org/tips-overtime-income-tax-deduction-state-budgets/
9.https://taxfoundation.org/research/all/state/big-beautiful-bill-state-tax-impact/
10.https://tax.thomsonreuters.com/blog/how-states-assess-federal-tax-changes/
11.https://taxfoundation.org/data/all/state/state-income-tax-rates-2026/
12.https://leg.colorado.gov/bills/hb25-1296
13.https://payroll.org/news-resources/news/news-detail/2025/09/05/colorado-s-response-to-one-big-beautiful-bill-act
14.
https://tax.colorado.gov/sites/tax/files/documents/Book104_2025.pdf (2025 booklet establishing framework)
15.https://tax.colorado.gov/income-tax-topics-state-income-tax-addback
16.
Colorado General Assembly fiscal note — https://content.leg.colorado.gov/sites/default/files/documents/2025A/bills/fn/2025a_hb1296_f1.pdf
17.https://www.coloradopolitics.com/2025/07/24/advance-colorado-sues-the-state-over-2025-overtime-tax-law-claims-tabor-violation-3d2ec0f2-3d6b-5f19-9487-e6ca446829f1/
18.https://gazette.com/colorado_politics/advance-colorado-sues-tax-bill/article_6b2f94b3-2e0d-5579-a5a8-e086b16beacd.html
19.Not located in available secondary sources as of May 2026.
20.https://oregoncapitalchronicle.com/2026/02/25/oregon-will-partially-disconnect-state-tax-code-from-new-federal-code-to-curb-revenue-loss/
21.https://www.foster.com/larry-s-tax-law/senate-bill-1507-was-passed-by-the-oregon-legislature-and-will-likely-become-law-breaking-down-what-it-means-to-oregon-businesses
22.https://www.tax1099.com/obbba-state-conformity
23.https://leginfo.legislature.ca.gov/faces/billNavClient.xhtml?bill_id=202520260SB711
24.https://www.grantthornton.com/insights/alerts/tax/2025/salt/a-e/ca-conformity-date-update-excludes-obbba-10-21
25.https://www.ftb.ca.gov/about-ftb/newsroom/tax-news/2025/11.html
26.https://www.ftb.ca.gov/about-ftb/newsroom/tax-news/2026/03.html
27.Parent article fact-check (FTB scoring)
28.Math derived from § 225 cap and CA marginal rate tables
29.https://twu106.org/new-york-joins-other-states-in-rejecting-key-tax-breaks-such-as-tipping-overtime/
30.https://tax.thomsonreuters.com/blog/state-decoupling-from-federal-tax-provisions/
31.Pending — 2026 IT-225 instructions not yet published as of May 2026
32.
https://www.tax.ny.gov/pdf/current_forms/it/it201i.pdf (IT-201 instructions)
33.https://reedcorp.tax/helpful-guides/ny-it-201-line-by-line/
34.Parent article fact-check entry
35.https://taxschool.illinois.edu/post/obbba-update-qualified-tips-and-overtime-compensation-for-tax-year-2025/
36.https://lifthcm.com/article/illinois-payroll-tax-changes-2026
37.https://www.cpapracticeadvisor.com/2026/02/11/trumps-obbba-cut-taxes-on-tips-but-heres-why-servers-in-illinois-and-other-states-will-still-pay/177883/
38.https://www.pierceatwood.com/alerts/maine-governor-janet-mills-provides-temporary-obbba-conformity-directions
39.https://natlawreview.com/article/maine-governor-janet-mills-provides-temporary-obbba-conformity-directions
40.
https://www.maine.gov/revenue/sites/maine.gov.revenue/files/inline-files/ta_october2025_vol35_iss14_0.pdf (Maine Revenue Services Tax Alert)
41.https://legislature.maine.gov/doc/12344 (DAFS overview)
42.https://arbcpa.com/state-conformity-to-obbba-tax-provisions-what-businesses-and-taxpayers-in-maine-massachusetts-and-new-hampshire-need-to-know/
43.https://www.metaxaide.com/maine-modifications-and-credits
44.https://www.maine.gov/revenue/sites/maine.gov.revenue/files/inline-files/25_1040me_gen_instr_w_cover_pg.pdf
45.https://dccouncil.gov/council-separates-elements-of-district-tax-code-from-the-federal-to-fund-family-tax-savings-and-youth-tax-credit-reinstates-temporary-juvenile-curfew/
46.https://www.bdo.com/insights/tax/district-of-columbia-takes-emergency-action-to-curb-obbba-related-revenue-loss
47.https://taxfoundation.org/blog/dc-obbba-conformity/
48.https://www.afslaw.com/perspectives/alerts/district-columbias-tax-decoupling-dispute-congressional-disapproval-and-ongoing
49.https://www.ntu.org/foundation/detail/dc-government-clashes-with-congress-over-local-tax-law
50.https://www.taxnotes.com/research/federal/other-documents/other-tax-correspondence/d.c-tax-decoupling-remains-effect-2025-officials-say/7v146
51.https://focushr.net/overtime-tips-w2/
52.https://unclekam.com/tax-strategy-blog/2026-tax-changes-arizona/
53.https://www.azleg.gov/legtext/57leg/2R/summary/S.1106FIN.DOCX.htm
54.https://www.azleg.gov/legtext/57leg/2R/summary/S.1638FIN_ASPASSEDCOMMITTEE.DOCX.htm
55.https://edzollarscpa.com/2026/01/23/an-all-too-familiar-conformity-issue-for-arizona-tax-professionals/
56.https://www.crowe.com/insights/tax-news-highlights/the-patchwork-of-state-conformity-to-the-obbba
57.https://gov.georgia.gov/press-releases/2026-05-11/gov-kemp-signs-legislation-lowering-taxes-and-supporting-economic-growth
58.https://www.cbsnews.com/atlanta/news/kemp-signs-2-tax-cut-bills-delivering-savings-for-georgia-families-and-homeowners/
59.https://www.bdo.com/insights/tax/georgia-enacts-important-salt-bills-several-others-await-kemps-signature
60.https://www.aprio.com/insights-events/georgia-tax-refunds-conformity-update-two-bills-big-impact-ins-article-tax/
61.Math derived from HB 463 cap + GA rate
62.https://taxnews.ey.com/news/2026-0326-proposed-massachusetts-bill-would-delay-conformity-to-certain-federal-tax-changes-made-by-the-obbba
63.https://www.lga.cpa/insights/blog/understanding-proposed-changes-to-massachusetts-tax-conformity-for-businesses-under-h-4975/
64.https://www.macomptroller.org/announcement/overtime-obbba/
65.https://arbcpa.com/massachusetts-proposes-legislation-to-delay-obbba-conformity-what-it-means-for-businesses-and-taxpayers/
66.https://www.forvismazars.us/forsights/2026/03/virginia-updates-tax-law-in-response-to-one-big-beautiful-bill-act
67.https://www.bakertilly.com/insights/virginias-budget-legislation-includes-multiple-tax-changes
68.https://carry.com/news/virginia-static-tax-conformity-obbba-decoupling
69.https://www.dhrm.virginia.gov/docs/default-source/hr-highlights-newsletter/2026-january-highlights/let-s-get-it-rightflsa-status-overtime-policy-and-obbba.pdf
70.https://www.irs.gov/forms-pubs/about-form-1040
71.Virginia Form 760 instructions (cited
72.not directly URL-quoted in this fact-check)
73.https://www.irs.gov/forms-pubs/about-form-w-2
74.Per-state primary citations above for the 1 FTI decoupler, 4 passthroughs, 7 statement-issued jurisdictions, 2 AGI-starting non-§-225 decoupling cases
75.Tax Policy Center briefing book for AGI/FTI/own-base structural framework
76.Tax Foundation for static-conformity classification.

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