After making our way down I-95 from Maine through New Jersey, we’ve reached the final stretch of this leg of our OB3 road trip. This article will wrap up our journey with stops in Delaware, Maryland, and the District of Columbia. Each offers its own approach to OB3 conformity and a set of surprises for taxpayers navigating the post-OB3 landscape.
Delaware
Delaware generally conforms to the Internal Revenue Code, but Delaware H.B. 255 modifies the timing of certain deductions and decouples the state from select OB3 provisions.
R&E Expenditures
For corporate taxpayers, Delaware has decoupled from OB3’s retroactive treatment of unused capitalized qualified R&E expenditures for tax years 2022 through 2024. Unamortized R&E amounts from tax years 2022-2024 must continue to be deducted under TCJA rules. For tax years 2025 and forward, Delaware conforms to federal rules that permit immediate expensing of qualified domestic R&E expenditures in the year incurred.
Bonus Depreciation
Through tax year 2024, Delaware conformed to federal depreciation rules under IRC §168, including bonus depreciation. With H.B. 255, Delaware has decoupled from OB3’s provisions that permit 100% bonus depreciation for certain business property placed in service after January 19, 2025. This decoupling applies to both qualified assets under IRC §168(k) and qualified production property under IRC §168(n). Depreciation, including bonus depreciation where applicable, will continue to be determined under TCJA rules.
Maryland
Maryland is a rolling conformity state, but its conformity statute includes a safeguard: federal changes enacted during a tax year do not automatically apply if their revenue impact exceeds $5 million. Because several OB3 provisions exceed the $5 million threshold, Maryland will decouple from those provisions. This automatic decoupling applies only to the fiscal year in which the federal amendments are enacted or to any preceding tax year. To make provisions inapplicable in future tax years, the legislature must decouple Maryland law from federal law.
R&E Expenditures
Maryland will decouple from OB3’s full expensing of R&E expenditures and from OB3’s transition and acceleration rules for unamortized 2022-2024 R&E. R&E expenditures incurred in prior years and amortized under TCJA rules must continue to follow those rules. For R&E incurred on or after January 1, 2025, Maryland will require amortization over 60 months. Maryland’s guidance provides for straight-line amortization at 20% per year, which differs from the TCJA mid-year convention. For 2025 and later, Maryland’s decoupling modifications are not necessary if a taxpayer does not accelerate 2022-2024 R&E amortization or elects §174A amortization over at least 60 months. Maryland will conform to the amortization rules for foreign R&E.
At this time, Maryland has not decoupled from immediate expensing under §174A for years after 2025.
163(j) Business Interest Limitation
For Maryland purposes, taxpayers compute their §163(j) limitation using ATI that does not add back depreciation, amortization, or depletion. At this time, Maryland has not decoupled from the federal ATI calculation under §163(j) for years after 2025.
Bonus Depreciation
Maryland already decouples from bonus depreciation under IRC §168(k), and this decoupling applies to any OB3 changes to bonus-eligible assets. Maryland will also decouple from OB3’s new bonus depreciation provisions under IRC §168(n) for qualified production property. Bonus depreciation claimed under IRC §168(n) must be added back for Maryland purposes, with a subtraction allowed for depreciation computed under MACRS without bonus. Maryland S.B. 284, enacted in April 2026, made the decoupling from IRC §168(n) permanent.
District of Columbia
The District of Columbia and Congress remain at odds over the District’s decision to decouple from several OB3 provisions. In December 2025, the District enacted Act 26-0214 to decouple from selected OB3 provisions. Congress subsequently passed a joint resolution (signed by the President) purporting to repeal both the District’s Emergency Conformity Act and Temporary Conformity Act. The District’s Attorney General issued an opinion stating that HJR 142 did not nullify the District’s legislation. The opinion explains that HJR 142 does not retroactively alter the tax liability of calendar-year 2025 taxpayers and did not repeal the Temporary Act, which remains in effect until September 25, 2026. The Attorney General also questions the validity of HJR 142, noting that Congress acted outside the time limit established under the Home Rule Act.
At present, taxpayers, particularly calendar year filers, should operate as though the District’s Emergency Conformity Act and Temporary Act remain in effect.
R&E Expenditures
For R&E expenditures, the District has decoupled from OB3’s retroactive treatment of unused capitalized R&E amounts. Unamortized R&E amounts from tax years 2022-2024 must continue to be deducted under TCJA. Small businesses may not amend prior-year District returns to claim refunds under OB3’s transition rules. For tax years 2025 and forward, the District has decoupled from §174A’s immediate expensing of domestic R&E expenditures. Domestic R&E must continue to be amortized over five years, beginning at the midpoint of the taxable year in which the expenditure is paid or incurred.
163(j) Business Interest Limitation
The District continues to apply §163(j) using ATI that does not add back depreciation, amortization, or depletion.
Bonus Depreciation
The District already decouples from bonus depreciation under IRC §168(k) and will also decouple from OB3’s new bonus depreciation provisions under IRC §168(n).
Our OB3 journey down I-95 ends here. As we leave the East Coast corridor behind, we’ll head south and west, where OB3’s impact shifts again — and the next stretch of the road promises even more twists in how states respond to the bill.
