Cross-border Tax Talks

OB3 Curveballs: Federal Tax interplay and State Tax conformity 

Wade Sutton (PwC’s WNTS International Tax Services Leader) guest hosts the podcast and is joined by Rob Ozmun, a State and Local Tax Partner, and Monic Kechik, PwC’s WNTS Federal Tax Services Leader. Together they discuss the OB3 ‘curveballs’ to the federal changes: Section 163(j) - ATI addbacks of depreciation and amortization; Section 174A - domestic expensing; Section 168(k) - the return to 100% bonus depreciation; and Section 168(n) - qualified production property (QPP). They explore how accelerated deductions can trigger BEAT and CAMT via ordering‑rule dynamics and book‑tax timing, creating cash‑vs‑ETR trade‑offs that can be addressed with capitalization provisions. They also examine state conformity models, rapid decoupling (e.g., D.C.), and wrinkles such as California’s departures and R&D credits.

• 00:45 - Welcome: Favorite Thanksgiving Tradition 
• 02:45 - What changed in OBBBA? 
• Section 163(j) - ATI addback; timing nuances and ordering (2025/2026) 
• Section 174A - domestic expensing or ≥60‑month amortization; foreign unchanged 
• Section 168(k) - bonus depreciation: back to 100% for property acquired and placed in service after 01/19/2025
• Section 168(n) - potential bonus depreciation on certain nonresidential real property used in qualified production 
• 06:30 - Data centers: definitional uncertainty; guidance needed 
• 08:05 - State budgets and decoupling pressures; DC’s emergency bill mechanics 
• 09:05 – Conformity 101: rolling, annual, and fixed models 
• 10:30 - Annual example: Florida’s point‑in‑time conformity and prior QIP choice 
• 11:25 - Fixed example: New Hampshire still on 2018 code (implications like CFC look‑through) 
• 12:45 - Will projects move? Income tax generally unaffected by asset location; incentives matter 
• 13:40 - Apportionment shift: three‑factor to single‑sales, market‑based sourcing 
• 14:55 - Pillar Two lens: real incentives over rate competition 
• 16:05 - Interactions: accelerated deductions vs. BEAT and CAMT exposure 
• 19:05 - CAMT mechanics: book timing, ordering rules, and why credits can’t bail you out 
• 24:00 - Cash planning pitfalls: Section 163(j) limits driven by ATI reductions 
• 25:05 - Provision timing: decisions by return filing, but year‑end modeling still critical 
• 26:40 - Outlook: guidance may ‘take the bite out of CAMT’ 
• 27:45 - SALT layer: tracking conformity, California exceptions, and R&D expensing differences 
• 29:30 - States and federal base‑erosion regimes: CAMT not adopted; BEAT rare, limited adoption 
• 29:45 - State R&D credits: California’s $5M cap and cash‑flow surprises 
• 30:45 - When federal elections hurt states: Section 59(e), state‑specific overrides, permanents vs. temporaries 
• 32:10 - ‘SALT in the kitchen’: involve states early to shape outcomes 

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