Federal tax legislation commonly known as the One Big Beautiful Bill Act (OBBBA) was enacted July 4th, 2025. However, at this time, North Carolina has not yet updated North Carolina’s conformity date to the Internal Revenue Code to incorporate these federal changes. The state’s conformity date to the Internal Revenue Code remains January 1, 2023.
On January 8, 2026, the NCDOR issued an Important Notice explaining that, because North Carolina currently conforms to the Internal Revenue Code as of an earlier date, certain provisions enacted by the OBBBA may not apply for North Carolina income tax purposes unless the North Carolina General Assembly updates the conformity statute.
What This Means for Taxpayers
Because of this mismatch between federal and state law, taxpayers and tax preparers may face uncertainty when preparing 2025 North Carolina income tax returns. Certain deductions, depreciation rules, credits, or other tax treatments allowed for federal purposes under the OBBBA may require adjustments or addbacks on North Carolina returns unless the state adopts the changes.
The NCDOR indicated that taxpayers generally have several options when filing 2025 returns, including:
- Filing based on current North Carolina law, which may require adjustments for federal provisions not yet adopted by the state, as well an amended return later if legislation revises current federal conformity
- Requesting an extension of time to file, allowing additional time for the legislature to address conformity and for further guidance to be issued
Our Recommendation
Given the current uncertainty, our firm’s recommended approach is to extend 2025 federal and North Carolina income tax returns where the OBBBA changes could materially affect the calculation of state taxable income. Extending federal returns as well as North Carolina is recommended as state calculations may impact certain deductions and positions on federal returns.
Extending returns will allow time for:
- Potential conformity legislation by the North Carolina General Assembly
- Additional guidance from the NCDOR
- Greater clarity on how federal changes should be reflected on state filings
This approach may help avoid unnecessary amended returns or filing positions that later need to be reversed.
What We Will Do
Our team will review your situation as we prepare your 2025 returns and determine whether the federal law changes create a potential North Carolina conformity issue. If so, we will discuss the best filing strategy with you, which in many cases will include filing an extension.
We will continue monitoring legislative developments and guidance from the North Carolina Department of Revenue and will keep you informed of any updates that affect your filings.
In the meantime, please contact your engagement team members if you have questions about how this issue may impact you or your business.
We also encourage clients who may be affected to consider sharing their perspectives with their state representatives in the General Assembly. Our firm has already discussed these conformity issues with several legislators, and taxpayer input can be helpful as the process moves forward. The General Assembly has a helpful “Find your Legislators” search tool located here.
