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The Tax Foundation is the nation’s
leading independent tax policy
research organization. Since 1937,
our research, analysis, and experts
have informed smarter tax policy
at the federal, state, and local
levels. We are a 501(c)(3) nonprofit
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GILTI and Other Conformity Issues Still
Loom for States in 2020
• Even two years after enactment of the federal Tax Cuts and Jobs Act (TCJA),
many states have yet to issue guidance explaining how they conform to key
provisions of the law, particularly those pertaining to international income.
• Twenty-one states and the District of Columbia conform to changes in the
federal tax code on a rolling basis, while 15 have what is known as “static
conformity” and two have rolling conformity for corporate, but not individual,
income taxes. The remaining states with income taxes only selectively
conform to the federal tax code.
• Twenty-four states tax or potentially tax Global Intangible Low-Taxed Income
(GILTI), of which 17 have issued guidance; in most cases, this represents the
states’ first significant foray into the taxation of international income.
• State tax systems were not made to accommodate international income, and
many of the resulting tax regimes give rise to serious constitutional questions.
• Twenty-four states provide a deduction for Foreign-Derived Intangible
Income (FDII), though seven states which currently tax GILTI do not.
• When the federal tax code transitioned from a worldwide to a quasi-territorial
system, deferred foreign earnings were “deemed” repatriated and taxed at
a preferential rate, a provision captured in the tax codes of 14 states—often
without the preferential rate.
• Sixteen states conform to an important pro-growth element of federal tax
reform, the provision providing for immediate e