Tax insight

Pennsylvania adopts legislation decoupling from federal tax act provisions

Insight
5 minute read
November 20, 2025

What happened?

The Pennsylvania General Assembly passed, and Governor Josh Shapiro (D) signed, legislation (H.B. 416) on November 12 decoupling the state from major corporate tax provisions in the federal One Big Beautiful Bill Act (the Act, P.L. 119-21).

Why is it relevant?

The legislation requires, for tax years beginning after December 31, 2024, modifications to Pennsylvania corporate taxable income for amounts deducted for research and experimental (R&E) expenditures and qualified production property (QPP) under the Act’s provisions. The legislation also requires that the Section 163(j) interest expense limitation be applied based on the pre-Act rules.

Actions to consider

Taxpayers will need to track and maintain separate workpapers for these changes, much like they may be doing for the existing bonus depreciation addback. For Section 163(j), taxpayers will need to consider the Department of Revenue’s existing guidance, which only requires a Pennsylvania limitation under Section 163(j) to be computed if there is a federal limitation. This issue is likely to arise when taxpayers are modeling the Act’s Section 163(j) calculation changes.