On May 28, 2026, Governor Hochul signed New York’s Fiscal Year 2027 budget into law, and buried inside it was a tax decision that directly affects any retail or CPG business operating in New York. The state formally decoupled its corporate and individual income taxes from several of the most valuable provisions in the One Big Beautiful Bill Act. That means the bonus depreciation restoration and the R&D expensing rules that are helping your federal return will not help your New York return at all. You will still have to depreciate equipment the old way in New York and still have to amortize R&D costs over five years on your state filing. The two returns will now tell meaningfully different stories about the same business.
The dollar impact is real and worth calculating. A $1 million equipment purchase that is fully deducted in year one for federal purposes still gets depreciated over its useful life in New York. If that asset has a seven-year life, the New York return shows approximately $128,000 more in taxable income than the federal return in year one. Add $300,000 in domestic R&D spend that is expensed federally but amortized at $60,000 per year in New York, and the state-level income adjustment in year one is $368,000. At New York’s extended 7.25% corporate rate, which now applies through 2030 for businesses with income above $5 million, the additional state tax is approximately $26,700 per year on those two items alone. For businesses in New York City, add approximately 8.85% city tax on top of that.
Federal versus New York State tax treatment on a $1 million equipment purchase and $300,000 in R&D spend.
This is not something that resolves itself. The decoupling is locked in through at least 2030. Multi-state operators need to update their state tax compliance processes, confirm that New York quarterly estimated payments reflect the decoupled treatment, and in many cases build a separate state tax model for New York that runs alongside the federal model. Your federal OBBBA planning is not a complete solution if you have significant New York operations. You need a separate state strategy.
Bottom Line: New York opted out of the most valuable OBBBA provisions for state tax purposes. If your business operates in New York and you have not built a separate state model that reflects the decoupling, your estimated taxes and state filings are likely wrong right now.