President’s Perspective: State Law Changes & 2026 Outlook

Key Points

California’s Senate Bill 711 aligns the state’s tax code with federal law, simplifying compliance while preserving important state-level differences.
The One Big Beautiful Bill restores full deductions for R&D expenses and 100 percent bonus depreciation, creating major planning opportunities for 2026.
Business owners should act early to capture expiring solar credits, adjust to new charitable deduction limits, and strengthen retirement savings plans.

Entering 2026 with Clarity and Confidence

As we move into 2026, many business owners are feeling a renewed sense of stability. The passage of the One Big Beautiful Bill (OBBB) has provided clarity in several key tax areas, reversing restrictive provisions and reintroducing valuable incentives. Although the environment feels steady, this is still a year when early planning is important. Intentional action now can strengthen your financial position, protect cash flow, and set the stage for long-term success.

We’ve highlighted the most relevant developments for our clients and business owners, especially those tied to state law changes and federal updates that will shape financial strategies in 2026.

What Is California Senate Bill 711 and Why Does It Matter for Businesses?

California Senate Bill 711 (SB 711) is one of the most important state-level tax updates in recent years because it better aligns California’s tax code with the federal one. Signed into law on October 1, 2025, the bill advances the state’s conformity date to January 1, 2025, reducing discrepancies between federal and state filings and making compliance easier for business owners.

Key highlights include:

Like-kind exchanges now follow federal rules, limiting deferrals to real property only.
Research & Development (R&D) credits adopt the federal Alternative Simplified Credit structure while preserving California’s higher in-state credit rates.
Interest expense deductions remain fully allowed since California continues to decouple from the federal business interest expense limitation under Section 163(j).
Renewable energy incentives remain independent of federal programs, allowing California to maintain its own credits and deductions.

These changes will simplify reporting for many taxpayers, but each business should review its own situation to understand where conformity creates benefits and where decoupling may still apply.

How Has the R&D Tax Credit Changed for 2026?

The R&D tax credit has become significantly more valuable in 2026 due to the OBBB’s reversal of the prior capitalization requirement for research expenses. Businesses can now immediately deduct qualified research and development costs, restoring one of the most impactful incentives for innovation.

This change allows companies that invest in technology, new products, or process improvements to manage cash flow more effectively while maintaining momentum in innovation. Many businesses that paused R&D efforts in previous years are now revisiting those plans to capture the full benefit.

California’s SB 711 complements this update by maintaining immediate expensing for state purposes, giving businesses a consistent advantage at both the state and federal levels.

When Should Businesses Take Advantage of Bonus Depreciation and Solar Credits?

The best time to leverage both bonus depreciation and solar credits is now, while these incentives remain fully available. Under the OBBB, bonus depreciation has been restored to 100 percent for federal tax purposes. Restoring bonus depreciation allows businesses to immediately deduct the entire cost of qualifying property, such as machinery, equipment, or certain improvements, in the year they are placed in service.

At the same time, the commercial solar credit continues through December 31, 2027, offering up to a 30 percent tax credit for qualifying installations if construction begins before July 5, 2026. Residential solar credits have already expired, which makes the commercial credit especially valuable for businesses investing in renewable energy.

Together, these provisions create an important opportunity to reduce taxes while improving long-term productivity and sustainability. Business owners should plan now to take advantage of these incentives before they phase out.

What Do the New Charitable Deduction Limits Mean for 2026?

Charitable giving looks different in 2026 due to new limits on how much income can be deducted for contributions. For many taxpayers, this means a smaller percentage of charitable donations will qualify for deductions than in past years.

Those who made large gifts in 2025 were able to take advantage of more flexible rules before these restrictions took effect. Now that the new limits are in place, it is important to revisit giving strategies to ensure they still align with both philanthropic goals and overall tax efficiency. Careful planning can help maximize the impact of your donations while remaining compliant under the updated framework. Learn more by reading our GC Wealth article, The 2025 Tax Act: What It Means for Your Charitable Giving.

Why Should Retirement Planning Be a Priority Early in the Year?

Starting or expanding a retirement plan early in the new year provides both immediate and long-term benefits. By establishing or contributing to a 401(k), SIMPLE IRA, or SEP plan in the first quarter, business owners can spread contributions over more months, increase savings potential, and secure meaningful deductions that lower taxable income.

This proactive approach also supports employee retention and reinforces a commitment to financial well-being for everyone involved. Treating retirement planning as an early-year priority turns a common resolution into a lasting business strategy.

Which Tax Strategies Still Make Sense Every Year?

Time-tested tax strategies continue to deliver value in 2026. Accelerating deductions, deferring income when appropriate, and reviewing expenses for timing opportunities are fundamental tools for managing cash flow and improving financial results.

Even with fewer major legislative changes this year, the fundamentals remain powerful. Consistent execution of these core strategies builds stability and strengthens your financial foundation year after year.

How Has Tax Compliance Changed Under the One Big Beautiful Bill?

Tax compliance has become more straightforward in several areas under the OBBB, with higher thresholds and more streamlined filing requirements. These updates reduce administrative burdens for many businesses and create a clearer, more predictable reporting environment.

While these improvements make compliance easier, organization remains key. Staying on top of documentation, deadlines, and reporting requirements ensures that these changes truly translate into less stress and greater efficiency during filing season.

What Are Business Owners Asking About Most in 2026?

This year, business owners are most interested in R&D credits, solar incentives, charitable deduction changes, and retirement planning opportunities. Many are also asking how California’s new conformity under SB 711 may simplify multi-state filing for businesses operating across different jurisdictions.

Our Tax team is actively gathering insights from clients and colleagues to identify the most common areas of concern and opportunity. These conversations help shape our guidance and ensure that our planning advice reflects what matters most to business owners right now.

The Bottom Line: Proactive Planning Creates Opportunity

If 2025 was a year of change, 2026 is a year for strategic action. Greater alignment between state and federal tax codes, reinstated deductions, and extended incentives create new opportunities to plan confidently and act decisively.

The most successful business owners do not wait for deadlines. They make informed decisions early and position their businesses to thrive. Whether you are evaluating R&D credits, considering solar investments, or refining your retirement plan, now is the time to take action.

Contact the Grimbleby Coleman team to discuss how these updates affect your business and to build a 2026 strategy that turns today’s clarity into tomorrow’s confidence.

Frequently Asked Questions (FAQ)

How does California Senate Bill 711 affect my 2026 tax filing?
SB 711 updates California’s conformity with the federal tax code, meaning your state and federal filings will now align more closely. It simplifies compliance but also preserves unique California differences, such as full interest expense deductibility and independent renewable energy incentives.
How does California Senate Bill 711 affect my 2026 tax filing?
SB 711 updates California’s conformity with the federal tax code, meaning your state and federal filings will now align more closely. It simplifies compliance but also preserves unique California differences, such as full interest expense deductibility and independent renewable energy incentives.
What are the biggest business tax opportunities for 2026?
Key opportunities include immediate expensing of R&D costs, 100 percent bonus depreciation for asset purchases, and a 30 percent commercial solar credit available through 2027. Early planning helps business owners capture these benefits before any future changes reduce their value.
How should I adjust to the new charitable giving limits in 2026?
With deduction limits now in place, it’s best to plan charitable contributions throughout the year instead of at year-end. Working with your tax advisor can help you identify the most tax-efficient donation amounts and timing under the new rules.
Why is early retirement planning so important for business owners?
Starting or expanding a retirement plan early in the year allows you to maximize contributions and spread them out over more months. It also provides immediate tax deductions while building long-term financial security for you and your employees.

Looking for more detailed information, not covered here? Check out the Full 2025 Year-End Tax Planning Guide for Businesses from BDO.