California After OBBBA: What Sacramento May Conform To, What It Will Likely Leave Behind

California does not automatically adopt new federal tax laws. The Legislature must pass a conformity bill and the Governor must sign it. The Franchise Tax Board explains this framework on its conformity page, which is the starting point for understanding how federal changes flow, or do not flow, into California returns. See California Conformity to Federal Law

Where things stand today

The Senate Revenue and Taxation Committee is running a multi-year conformity project. For 2025–26, the main vehicle is SB 711. The committee’s page hosts the working materials, including a line-by-line “Conformity Chart.”

See Tax Conformity | Senate Revenue and Taxation Committee and the SB 711 Conformity Chart (PDF).

SB 711 updates California’s “specified date” of federal conformity so that, unless otherwise stated, references to the Internal Revenue Code are pegged to January 1, 2025 for tax years beginning on or after January 1, 2025. Because OBBBA was enacted July 4, 2025, its provisions are not automatically included in SB 711’s date change and would require additional state legislation to be effective for California.

Separately, Governor Newsom and other state officials have publicly commented on OBBBA at the federal level. Governor Newsom statement on passage of Trump’s “Big Beautiful” bill. These statements provide political context rather than conformity guidance.

What California is likely to adopt or not adopt in the near term

1) Federal items through January 1, 2025 referenced in SB 711.
SB 711 moves many older federal references forward to January 1, 2025 and also flags numerous areas where California will continue to modify or decouple. Practically, this modernizes many cross-references without touching OBBBA’s July 2025 provisions. See the SB 711 Conformity Chart (PDF).

2) OBBBA provisions enacted July 2025.
Because California requires affirmative legislation to conform, OBBBA changes such as new or expanded individual deductions, depreciation changes, and any altered federal definitions do not apply to California unless and until Sacramento passes a bill that adopts them. The FTB’s overview explains this non-automatic approach: California Conformity to Federal Law

3) Longstanding California policy choices that differ from federal law.
California often chooses not to follow certain federal provisions. For example, California has historically not allowed the federal qualified business income deduction under IRC section 199A:

• Section 179 and bonus depreciation: California does not conform to federal bonus depreciation and limits Section 179 to $25,000 with a $200,000 phaseout. See the FTB 3885A instructions and the Form 3885L instructions noting nonconformity to IRC 168(k).

• Section 199A (QBI) nonconformity: California does not conform to the federal qualified business income deduction under IRC section 199A. See the FTB 565 Partnership Tax Booklet.

• Elective pass through entity tax (PTET) extension: California extended the elective pass through entity tax through tax years beginning on January 1, 2026 and before January 1, 2031. See FTB Tax News.

• Estimated tax safe harbor for high income: If prior year California AGI exceeds $150,000, required estimated payments equal the lesser of 90 percent of current year tax or 110 percent of prior year tax. See the 2025 Form 540-ES instructions and Estimated tax payments.

• Section 179 limit for LLC members and S corporation shareholders: For California, the Section 179 deduction is limited to $25,000 and phases out when total Section 179 property placed in service exceeds $200,000; the limitation applies at both the entity and owner level. See the 2024 LLC Schedule K-1 Instructions and FTB 3885P worksheet.

• Electronic payment requirement for large individual balances: Individuals must pay electronically once they make an estimated or extension payment over $20,000 or file a return with tax liability over $80,000, and a 1 percent penalty may apply if payments are not made electronically. See Mandatory e-Pay for Individuals, the 2025 Form 540-ES instructions, and Common penalties and fees.

See FTB instructions confirming nonconformity to section 199A, e.g., Partnership K-1 Instructions (example). The FTB’s Publication 1001 (PDF) is also a useful list of current federal-state differences.

What this means for 2025 California returns

Until Sacramento acts, federal OBBBA changes do not flow into California. That means a deduction or rate change that lowers federal taxable income may not lower California taxable income. For planning, taxpayers should model separate federal and California impacts for 2025 and later years, watch the progress of SB 711, and track any new conformity bills that specifically address OBBBA provisions. See Tax Conformity | Senate Revenue and Taxation Committee. srev.senate.ca.gov

California’s standard deduction and brackets continue to follow California law, not the new federal amounts. Current California standard deduction amounts are posted on FTB pages for forms and estimated taxes. See 2025 540-ES instructions and Deductions overview.

How I can help

I model federal and California positions side by side for 2025 and later, measure where OBBBA reduces federal tax but not California tax, and plan elections and timing that fit California’s current rules. I also monitor SB 711 and any targeted conformity bills, then update projections and entity strategies when the Legislature acts. Contact me If you want a focused review of your 2025 plan with these differences in mind. Tax Planning and Preparation Services