The 'One Big Beautiful Bill Act' is now law. What does that mean for business taxpayers?
One of the most sweeping pieces of legislation in President Trump's second term in office was signed into law July 4, 2025. The One Big Beautiful Bill Act (OBBBA) includes a number of tax provisions impacting businesses.
The law extends key expiring provisions from the Tax Cuts and Jobs Act (TCJA), while also advancing other tax priorities aligned with the Trump administration. Notably, the legislation revises how foreign income earned by corporations is taxed and eliminates a range of clean energy tax incentives.
The following is an overview of a few of the most notable tax provisions affecting businesses, what they may mean for your organization, and what steps you should consider in the coming months.
Overview of tax provisions
From R&D and energy tax changes to qualified small business stock and bonus depreciation impacts, these are a few OBBBA provisions that business taxpayers should keep in mind.
- Limitation on interest expense deduction: The law reinstates the EBITDA-based limitation under Section 163(j) for tax years beginning after December 31, 2024. This means that for purposes of the business interest deduction, adjusted taxable income would once again be calculated without subtracting depreciation, amortization, or depletion—a more generous approach than current law, which uses EBIT. This modification would be permanent.
- R&D expensing: The law includes a permanent restoration of immediate expensing for domestic research and development costs. Notably, it offers a retroactive benefit: taxpayers with average gross receipts under $31 million for the three years preceding 2025 may amend 2022–2024 returns to claim full expensing (likely resulting in a tax refund if the taxpayer had a tax liability), while others may deduct unamortized costs from those years on their 2025 tax return or over two years. This introduces strategic opportunities for eligible taxpayers. The treatment of foreign research and development expenditures remains unchanged, and those costs will continue to be capitalized and amortized over a period of 15 years.
- Energy tax provisions: Under the OBBBA, the Section 179D energy-efficient commercial building deduction will be eliminated, effective for projects beginning construction after June 30, 2026. (The deduction remains available for projects with construction starting prior to July 1, 2026.) It also repeals the 45L credit and begins a phaseout of certain green energy incentives including investment and production tax credits for solar and wind properties. These changes could significantly impact taxpayers involved in sustainable construction or energy-related planning.
- SALT deduction: The law preserves the Pass-Through Entity Tax deduction.
- Sec. 179 expensing: Under OBBBA, the limit businesses can deduct up front for qualifying purchases increases to $2.5 million, with the phaseout beginning when total purchases exceed $4 million. Both amounts will adjust for inflation going forward. This change, which applies to property placed in service in tax years beginning after December 31, 2024, may offer a valuable tax-saving opportunity for businesses planning large equipment or software investments in 2025 and beyond.
- Bonus depreciation: The law permanently allows a taxpayer to elect a 100% depreciation deduction for qualified production property (QPP) in the year it is placed in service, with the adjusted basis reduced accordingly. To qualify, construction must generally begin between January 20, 2025, and December 31, 2029, and the property must be placed in service in the U.S. before January 1, 2031. This can offer a significant upfront tax benefit for businesses planning large capital projects—making timing a critical factor in maximizing the deduction.
International tax highlights
The OBBBA introduces several international tax reforms aimed at simplifying rules, enhancing foreign tax credit (FTC) use, and aligning with global standards. Key changes include increasing the deemed paid FTC on Net CFC Tested Income from 80% to 90%, reducing deduction allocations to that income, and allowing certain U.S.-manufactured goods sold abroad to be treated as foreign-source income. It adjusts the Section 250 deduction, resulting in a 14% effective corporate rate (taking into account foreign tax credits) for Net CFC Tested Income (formerly Global Intangible Low Tax Income) and a 14% effective tax rate for Foreign-Derived Deduction Eligible Income (formerly Foreign Derived Intangible Income). It also expands the Base Erosion and Anti-Abuse Tax (BEAT) for large multinationals.
Other updates include a permanent extension of the look-through rule for passive income, a rollback of downward attribution rules, and a shift to pro rata income allocation for Subpart F and Net Tested CFC Income—affecting how gains are recognized when selling CFC stock. Together, these changes aim to improve parity and tighten oversight of cross-border tax practices.
Planning ahead: What you can do now
This is a good time to start evaluating your current tax strategy in light of the new law. Being proactive can help you stay ahead of any potential impacts, whether you're a domestic business owner or managing international interests. Here are a few steps to consider in the coming days and weeks:
- Review the opportunity to retroactively deduct 2022-2024 research & development expenditures, if eligible, and evaluate the benefits versus other elections to deduct these costs in 2025 or over the next two years.
- Re-evaluate the allocation of domestic versus foreign research & development resources under the new law.
- Assess upcoming capital expenditures in light of possible extensions to bonus depreciation and Section 179 limits.
- Evaluate international tax exposure, particularly for export income and global intercompany payments.
- Consider the elimination of the Section 179D and 45L incentives after June 30, 2026, when planning the construction or retrofit of real property. If you're planning to build or retrofit property, it may make sense to accelerate timelines to take advantage of these benefits.
- Consider the effects that 100% bonus depreciation will have on capital expenditure (CAPEX) projects or on the acquisition of real property when a cost segregation study is implemented. With full expensing now permanent for certain property, combining bonus depreciation with a cost segregation study can significantly accelerate tax deductions for real estate or equipment purchases. If your business is planning to invest in new buildings, machinery, or improvements, consult with your advisor to map out the most tax-efficient approach.
- Update your reporting processes for Form 1099 changes: Beginning with payments made after December 31, 2025, businesses must issue Forms 1099-NEC and 1099-MISC only for contractors or vendors paid $2,000 or more annually (up from the current $600 threshold). The threshold will be adjusted for inflation starting in 2027, so now is a good time to review and update your reporting procedures.
Reach out to your Kaufman Rossin tax advisor with any questions about how these or other tax provisions might affect your business.
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
