A provision quietly included in Pennsylvania’s $50.1 billion state budget will save the state almost $1 billion by decoupling from tax changes included in the budget reconciliation bill signed into law by President Donald Trump over the summer.

The state will keep $900 million it would otherwise have not received in corporate net income tax payments due to changes included in the One Big Beautiful Bill, according to an analysis of the implications of the state budget deal released last week by the Independent Fiscal Office.

Pennsylvania is not the first state to make such a move. Delaware, Illinois and Michigan have passed similar legislation decoupling from the corporate tax changes included in the federal law.

The changes were included in House Bill 416, the update to the state’s fiscal code passed as part of the deal to fund the state government in 2025-26.

The federal tax changes allow businesses to immediately deduct the cost of certain research costs, retroactive to the 2022 tax year. It also allows businesses to immediately deduct some factory construction costs and increases the maximum deduction businesses can take for interest expenses. The state typically follows federal tax rules when calculating corporate next income tax, making it necessary to formally decouple from the changes, the IFO said in its analysis.

While the IFO projects the decoupling will save the state $900 million, House Bill 416 also requires the Department of Revenue to submit a report by Dec. 31, 2026, to the General Assembly tracking the number of taxpayers impacted by the state’s decoupling move and the impact the move had on the state’s budget.

The decoupling provision has the biggest impact on the state budget, though it attracted far less attention than the other major tax change included in the 2025-26 spending plan, the creation of a Working Pennsylvania Tax Credit. This tax credit is expected to save 940,000 Pennsylvanians a combined $193 million in tax relief, according to the Department of Revenue.

The state tax credit amounts to 10% of the federal Earned Income Tax Credit. The maximum state tax credit will be $805.