With tax filing season well underway, many businesses are taking a closer look at State and Local Tax (SALT) considerations as they prepare and review their returns. As part of that process, questions about multi-state obligations, federal-state alignment, and planning elections are informing both current filings and decisions that may carry into the early part of the year.
In this Q&A, Grassi’s State and Local Tax Leader, TJ Beary, shares how clients are approaching these considerations and where attention should be focused this filing season.
Q: What’s a SALT issue that’s currently top of mind for clients this year?
A: One of the issues that is currently top of mind for our clients is nexus. As states continue to tighten and aggressively enforce economic nexus standards across both sales tax and income tax, many clients are becoming increasingly attentive to where they are approaching those nexus thresholds.
As a result, they are a lot more focused on identifying the jurisdictions where they might have a filing requirement and ensuring they are compliant before their exposure becomes too large.
Q: What’s a common tax issue, mistake or misconception you’re seeing this filing season?
A: A common misconception we see, especially in the SALT world, is conformity. There have been a lot of changes to the federal rules under the One Big Beautiful Bill (OBBBA), and clients often fail to recognize, or simply forget, that conformity is not automatic. Federal rules do not automatically apply for state tax purposes.
This can result in significant differences between federal and state taxable income, especially regarding the newer provisions introduced under OBBBA. A common example is the restoration of 100% bonus depreciation. A lot of states do not automatically conform and may still require the use of a traditional MACRS (Modified Accelerated Cost Recovery System) depreciation schedule.
Q: What’s a multi-state tax consideration growing in importance for companies right now?
A: One issue that continues to grow in importance is the continued erosion of the Public Law 86‑272 protection. This law is very old; it has been “on the books” for a very long time, and it protects companies that sell tangible personal property into states where they otherwise have no in‑state activity.
But new rules around internet activities, such as placing cookies on a customer’s browser, providing post‑sales customer support, or even accepting certain job applications through a website, may be viewed as activities that exceed the scope of solicitation. That can eliminate 86‑272 protection. States such as Massachusetts and New York have adopted guidance in this area, and clients should carefully reassess whether 86‑272 still applies.
Q: What’s a tax credit or incentive people should know about?
A: R&D credits. The federal R&D credit certainly comes to mind pretty easily for most taxpayers. The majority of states also offer some level of a state R&D credit, which would be in addition to the federal credit. Not only that, but these credits at the state level can sometimes be refundable, which means the benefit is immediate regardless of how much income you have or how much tax you pay.
As technological innovation continues to accelerate, including areas like AI, data centers, and advanced computing, more of the activities clients are performing are likely to be considered qualified research and therefore eligible for research credits.
Q: What’s one planning opportunity clients should be thinking about before they file?
A: A major planning opportunity for 2026 is going to be to reevaluate whether electing into pass‑through entity (PTE) tax regimes in states still makes sense. Under OBBBA, the state and local tax deduction cap increased from $10,000 to $40,000 and is indexed for inflation moving forward, meaning it will continue to increase over time.
For many clients, especially when you consider the additional compliance costs required to file PTE returns, the election may or may not continue to make sense for 2026 and beyond. One thing I would certainly advise is taking a look at that in advance of the 2026 filing season to see whether it still makes sense for you and your business.
The important thing to keep in mind is that many states require fairly early action to make these elections, often in the spring of the tax year in question. That timing is certainly something that should be considered.
Five SALT Decision Areas to Keep in Focus
Growth into new markets, evolving digital activity and federal legislative changes have added new layers to state tax compliance. Filing season is an opportunity to reassess exposure and align planning decisions with your broader business footprint.
As you finalize returns and look ahead, these five SALT decision areas should remain in focus:
- Nexus exposure as states increase enforcement across sales and income taxes.
- Federal-state conformity differences under OBBBA, which may create gaps between federal and state taxable income.
- Public Law 86-272 positions, especially as states expand interpretations around digital activity.
- State-level R&D credits, including refundability and expanded eligibility.
- PTET elections, which may require reevaluation under the higher SALT deduction cap.
Guidance Designed for Your Multi-State Footprint
Grassi’s State and Local Tax Team helps businesses understand where they should be registered and filing, assess nexus exposure, and manage other considerations that influence both compliance and planning. Our advisors work closely with clients to bring clarity across jurisdictions. Connect with a Grassi advisor to learn more.
