The Trump Administration has introduced comprehensive tax legislation known as the One Big Beautiful Bill Act, which includes sweeping changes to business taxation. This milestone legislation addresses multiple policy areas but includes significant provisions that could fundamentally alter how businesses approach capital investments, research and development, and operational expenses.
The bill represents an ambitious attempt to consolidate various policy priorities into a single piece of legislation, with business tax provisions designed to boost domestic investment, enhance manufacturing competitiveness, and provide immediate relief for research-intensive companies.
Key Takeaways
- Section 179 expensing limits more than double from $1 million to $2.5 million (Section 179 allows businesses to immediately deduct the full purchase price of qualifying equipment and business assets in the year purchased, rather than depreciating them over multiple years.)
- 100% bonus depreciation becomes permanent with no phase-down
- New 100% depreciation for production facilities meeting specific criteria
- Immediate deduction for domestic research and development (R&D) expenses (currently requires five-year amortization)
- Retroactive R&D benefits available for small businesses back to 2021
- Enhanced meal deductions for 100% of remote operations and general business meals
- Significant cash flow improvements through accelerated deductions
- Manufacturing incentives through production property depreciation
Critical Planning Deadlines
- Jan. 19, 2025:Key effective date for most provisions (Property must be acquired after this date to qualify for enhanced benefits.)
- Jan. 1, 2029:Construction deadline for production property benefits (Construction must begin before this date to qualify for 100% depreciation.)
- One year from enactment:Deadline for retroactive R&D elections (Small businesses must elect by this date to apply for benefits back to 2021.)
Section 70301: Permanent 100% Bonus Depreciation
This provision makes the 100% bonus depreciation deduction permanent, eliminating the scheduled phase-down that would have reduced the benefit over time. Companies can immediately deduct the full cost of qualifying business property in the year it's placed in service, rather than depreciating it over multiple years. This represents a massive cash flow advantage and eliminates uncertainty about future depreciation rates. For a company investing $5 million in qualifying equipment, this could mean an immediate $5 million deduction versus spreading that deduction over five-to-20 years under traditional depreciation rules.
Qualifying Property Includes
- Business equipment with recovery periods of 20 years or less
- Computer software and technology systems
- Manufacturing and production equipment
- Certain leasehold improvements
- Water utility property
The legislation includes transitional provisions allowing taxpayers to elect reduced percentages (40% or 60%) for the first year if beneficial for their specific tax situation.
They expanded the domestic R&D credit to be more incentivizing to companies looking to conduct R&D activities in the U.S.
This section creates a new tax framework that allows immediate deduction of domestic research and development expenses while maintaining the 15-year amortization requirement for foreign R&D investments. This provision fundamentally alters the economics of R&D location decisions, creating a significant tax advantage for companies conducting research activities in the U.S. Companies currently amortizing R&D expenses over five years can now deduct 100% of domestic R&D costs immediately. For a company with $2 million in annual domestic R&D expenses, this represents an immediate deduction versus $400,000 annually over five years. Qualifying small businesses can elect a retroactive application back to Dec. 31, 2021, potentially creating substantial refund opportunities.
Qualification Requirements for Small Business Retroactive Benefits
- Must meet gross receipts test under Section 448(c)
- Cannot be a tax shelter
- Must file election within one year of enactment
- Requires filing amended returns for affected years
Section 70305: Business Meal Deductions
This section restores deductions for business meal expenses and creates enhanced deductions for remote fishing and processing operations. This provision reverses restrictions on business meal deductibility and provides 100% deductions for meals in specified remote operations.
Companies operating fishing vessels or fish processing facilities in remote Alaska locations (north of 50 degrees latitude, outside metropolitan areas) can deduct 100% of meal costs rather than being subject to the typical 50% limitation. While specific percentage limitations are not detailed in this section, the provision restores business meal deductibility that had been restricted, providing operational expense relief for companies with significant client entertainment or employee meal programs.
Section 70306: Enhanced Section 179 Expensing
This section increases the dollar limits for immediate expensing of business equipment under Section 179. Section 179 of the Internal Revenue Code allows businesses to immediately deduct the full purchase price of qualifying business equipment and assets in the year they were purchased, rather than depreciating the cost over several years. This provision is designed to encourage business investment by providing immediate tax relief for equipment purchases.
New Limits
- Maximum annual expensing increases from $1 million to $2.5 million
- Phase-out threshold increases from $2.5 million to $4 million
Example: A manufacturing company purchasing $2.2 million in equipment can now expense the entire amount immediately, whereas under current law, only $1 million would be eligible for immediate expensing. The new higher limits will be indexed for inflation beginning in 2025, ensuring the benefits maintain their value over time. Companies planning major equipment purchases should consider timing acquisitions to maximize these enhanced benefits, particularly those with equipment needs between $1 and $2.5 million annually.
Section 70307: Production Property Depreciation
Section 70307 creates an entirely new 100% depreciation allowance, specifically for nonresidential real property used in qualified production activities. This provision allows immediate write-off of production facilities, something that traditionally depreciated over 39 years for nonresidential real property.
Qualification Requirements
- Must be nonresidential real property used in manufacturing, production, or refining
- Original use must commence with the taxpayer
- Construction must begin after Jan. 19, 2025, and before Jan. 1, 2029
- Must be placed in service before Jan. 1, 2031
- Property must be located in the U.S. or U.S. possessions
Excluded Activities
- Offices and administrative functions
- Research and development facilities
- Sales activities
- Lodging and parking facilities
The production activity must result in a substantial transformation of the property, consistent with manufacturing regulations. If the property stops being used for qualified production within 10 years, recapture provisions apply, potentially requiring repayment of the tax benefits. For companies planning new manufacturing facilities, this provision could make the difference between domestic and foreign investment decisions.
How Companies Should Plan for and Implement These Changes
The business tax provisions in the OBBB Act represent the most significant enhancement to business tax benefits in recent years, requiring immediate action to maximize their impact. Companies should assess current R&D activities to identify domestic versus foreign components, evaluate equipment purchase timing to optimize Section 179 and bonus depreciation benefits, review manufacturing expansion plans for potential production property advantages, and consider retroactive R&D elections for qualifying small businesses. These provisions collectively create powerful cash flow improvements through accelerated deductions while establishing clear incentives for domestic investment, research activities, and manufacturing operations. Businesses should proactively align their strategic planning with these changes through extensive financial modeling to understand the specific impact on their business or project, by reviewing any current investment and R&D plans and should consider accelerating or restructuring planned investments to optimize tax benefits. Companies that plan accordingly can secure significant competitive advantages in both tax savings and operational efficiency as the legislation moves through the legislative process.
How Ankura Can Help
Ankura's team of experts specializes in helping businesses across the U.S. navigate and secure state incentives to support growth, innovation, and development. Whether you are seeking tax credits, grants, or funding for your projects, our team provides tailored support to maximize the value of available programs. Our services include:
- Incentive Eligibility Assessment: Identifying the programs and opportunities best suited to your organization's needs and goals.
- Strategic Application Support: Guiding you through the application process, ensuring compliance with program requirements, and developing compelling submissions.
- Financial Modeling and Impact Analysis: Creating detailed financial models to highlight the value of incentives and their impact on your projects.
- Stakeholder Advocacy: Engaging with local, state, and federal officials to build support for your projects and secure necessary approvals.
With over $300 million in federal and state incentives secured for our clients in the past year, Ankura is your trusted partner in leveraging incentive programs to achieve your strategic objectives. Do you want a consultation and an estimate of how many state incentives your project might be eligible for?
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.
