The Center on Budget and Policy Priorities has published Obscure Tax Provision of Federal Recovery Package Could Widen State Budget Gaps: States Can Avoid Revenue Loss by “Decoupling”:

• A federal tax break in the federal recovery package could cost states up to $5.5 billion in revenue over the 2009-2011 period unless they “decouple” their tax codes from the provision.
• The provision allows businesses that buy back their debt at a discount to wait four years before beginning to pay taxes on the income the discount represents.
• Forty-three states could lose revenue from the provision because their tax laws are linked to the federal code. (Florida, Maryland and Minnesota have already decoupled.)
• In other similar situations, states have used decoupling to protect their revenues from changes in federal tax laws.
• States that fail to decouple could lose substantial amounts of revenue to provide tax savings to multistate corporations that have few facilities or employees in the state. There is no economic justification for conforming to the provision. If anything, doing so will hurt the state economy.