On May 28, 2025, the California Senate took a major step toward aligning the state’s tax laws with federal tax code changes by unanimously passing a federal conformity bill — the first such overhaul in nearly a decade.
This legislation, which still needs approval from the State Assembly and Governor Newsom, aims to incorporate over 1,000 federal tax changes made since 2015 into California’s Revenue and Taxation Code. The move is expected to simplify tax compliance, reduce administrative burden, and improve consistency for both individual and business taxpayers operating in the state.
California has long stood out as a "non-conforming state", meaning its tax laws do not automatically update to reflect changes in the federal Internal Revenue Code (IRC). Instead, the state selectively conforms by passing separate legislation.
As a result, tax preparers and filers have had to navigate a dual system — one for federal taxes and another for state taxes, often with different rules on:
This creates unnecessary complexity and often leads to confusion, delayed filings, and costly errors — especially for businesses operating in multiple states.
The bill (designated SB 711 pending assignment) proposes a sweeping alignment with federal tax changes made from 2015 through 2024, including:
It also includes transition rules and safe harbors to help taxpayers manage the change.
If passed, this conformity bill would make California's tax system:
For tax professionals, it may significantly reduce the need for manual state-level adjustments and allow for more streamlined software automation and client education.
Lawmakers have signaled bipartisan support, but implementation details — particularly around transition guidance and affected provisions — are still under discussion.
California’s long-awaited move toward federal tax conformity could be a game-changer for tax compliance in the state. It’s also a reminder that while federal laws set the tone, state-level adoption remains critical in shaping the tax landscape for businesses and individuals alike.
At Bizora AI, we’re monitoring conformity legislation across all 50 states to keep your firm ahead of what’s changing — and how it impacts the returns you file every day.