Opposition from organized business interests can impede policy reform. Under what conditions are firms incentivized to support reform? We argue that in federal systems state policy and politics can have a home state effect on the national preferences of firms and firms’ coalition membership. State policies can force firms to absorb regulatory cost, thus reducing the marginal cost of national policies. In addition, firms heavily regulated at the state level have incentives to strategically align with their state governments. We test our argument by matching original data on the positions of large electric utilities towards the Clean Power Plan and data on ad hoc coalition membership with data measuring state policy stringency and state government positions. Quantitative evidence is consistent with hypotheses: both state policies and state politics influence utilities’ national positions. Elite interviews help clarify different mechanisms. Our findings show how sub-national governments shape national interest group politics.