The One Big Beautiful Bill Act (OBBBA), signed into law on July 4 by President Trump, includes a wide range of business tax provisions that extend, revise, or replace key elements of the Tax Cuts and Jobs Act of 2017. The legislation affects numerous provisions of the business tax code, including bonus depreciation and business interest expense rules, as well as changes in international taxation and the elimination of several clean energy tax credits. Business owners should carefully review these provisions to understand the potential impact on their planning, compliance, and cash flow. Here is a summary of the business provisions:
Bonus Depreciation: OBBBA permanently extends the additional first-year (bonus) depreciation deduction (Section 168). The allowance is increased to 100% for property acquired and placed in service on or after January 19, 2025, as well as for specified plants planted or grafted on or after January 19, 2025.
Section 179 Expensing: The bill increases the maximum amount a taxpayer may expense under Section 179 to $2.5 million, reduced by the amount by which the cost of qualifying property exceeds $4 million.
Research and Development Expenses: OBBBA allows taxpayers to immediately deduct domestic research or experimental expenditures paid or incurred in tax years beginning after December 31, 2024. However, research or experimental expenditures attributable to research conducted outside the United States will continue to be required to be capitalized and amortized over 15 years under Section 174.
Small business taxpayers with average annual gross receipts of $31 million or less will generally be permitted to apply this change retroactively to tax years beginning after December 31, 2021. All taxpayers that made domestic research or experimental expenditures after December 31, 2021, and before January 1, 2025, will be permitted to elect to accelerate the remaining deductions for those expenditures over a one- or two-year period.
Limitation on Business Interest: The bill reinstates the earnings before interest, taxes, depreciation, and amortization (EBITDA) limitation under Section 163(j) for tax years beginning after December 31, 2024. For purposes of Section 163(j) interest deduction limitation for these years, adjusted taxable income would be computed without regard to the deduction for depreciation, amortization, or depletion. The bill would also modify the definition of “motor vehicle” to allow interest on floor plan financing for certain trailers and campers to be deductible.
Paid Family and Medical Leave Credit: Under OBBBA, Section 45S is amended to make the employer credit for paid family and medical leave permanent.
Special Depreciation Allowance for Qualified Production Property: The bill allows an additional first-year depreciation deduction equal to 100% of the adjusted basis of “qualified production property.” Qualified production property is generally nonresidential real property used in manufacturing.
Advanced Manufacturing Investment Credit: Under the bill, the advanced manufacturing investment credit rate increases from 25% to 35%, effective for property placed in service after December 31, 2025.
Spaceports: OBBBA amends Section 142(a)(1) to ensure spaceports are treated like airports under the exempt-facility bond rules. A spaceport is defined as a facility close to a launch or reentry site that is used to manufacture, assemble, or repair spacecraft or space cargo or is used for flight control operations, to provide launch or reentry services, or to transfer crew, spaceflight participants, or space cargo to or from a spacecraft.
Employer-provided Child Care Credit: The bill increases the amount of qualified child care expenses considered for purposes of the Section 45F employer-provided child care credit from 25% to 40%. The maximum amount of the credit increases from $150,000 to $500,000 ($600,000 for eligible small businesses) and will be adjusted for inflation.
Opportunity Zones: OBBBA makes opportunity zones permanent but with several changes, including narrowing the definition of “low-income community.” The changes would generally take effect January 1, 2027.
New Markets Tax Credit: The bill makes the Section 45D New Markets Tax Credit permanent.
Percentage-of-completion Method: OBBBA provides an exception to the Section 460(e) requirement to use the percentage-of-completion accounting method for certain residential construction contracts entered into after the date of the bill’s enactment.
Qualified Small Business Stock: The bill increases the Section 1202 exclusion for gain from qualified small business stock. For qualified small business stock acquired after the date of enactment of the bill and held for at least four years, the percentage of gain excluded from gross income will rise from 50% to 75%. If it is held for five years or more, the exclusion percentage increases to 100%.
Excess Business Losses: The bill makes Section 461(l)(1) limitation on excess business losses of noncorporate taxpayers permanent. It was scheduled to expire after 2028.
Clean Energy Incentives
The bill terminates many clean energy tax incentives, including:
- Section 25E previously owned clean vehicle credit (terminates after September 30, 2025)
- Section 30D clean vehicle credit (terminates for vehicles acquired after September 30, 2025)
- Section 45W qualified commercial clean vehicle credit (terminates after September 30, 2025)
- Section 30C alternative fuel vehicle refueling credit (terminates after June 30, 2026)
- Section 25C energy-efficient home improvement credit (terminates after December 31, 2025)
- Section 25D residential clean energy credit (terminates for expenditures made after December 31, 2025)
- Section 179D energy-efficient commercial buildings deduction (terminates for property the construction of which begins after June 30, 2026)
- Section 45L new energy-efficient home credit (terminates after June 30, 2026)
- Section 45V clean hydrogen production credit (terminates after January 1, 2028)
- Section 6426(k) sustainable aviation fuel credit (terminates after September 30, 2025)
The Section 168(e)(3)(B)(vi) provision allowing cost recovery for certain energy property and qualified clean energy facilities, property, and technology will be terminated after December 31, 2025, for energy property and after the date of enactment for qualified clean energy facilities, property, and technology.
The bill imposes restrictions on claiming the Section 45U nuclear power production credit for foreign entities and facilities that utilize imported nuclear fuel.
The Section 45Y clean electricity production credit is terminated for wind and solar facilities placed in service after December 31, 2027. No credit will be allowed to facilities that are owned or controlled by certain foreign entities. The Section 48E clean electricity investment credit is also terminated for wind and solar facilities placed in service after December 31, 2027. Restrictions are also placed around claims by facilities owned or controlled by certain foreign entities.
The Section 45Z clean fuel production credit is extended through 2029, and prohibitions are placed on the use of foreign feedstocks.
International Provisions
Deemed Paid Credit: The bill amends Section 960(d)(1) to increase the deemed paid credit for Subpart F inclusions from 80% to 90%.
GILTI and FDII: For tax years beginning after December 31, 2025, OBBBA reduces the Section 250 deduction to 33.34% for foreign-derived intangible income (FDII) and 40% for global intangible low-taxed income (GILTI), resulting in an effective tax rate of 14% for both.
The bill updates the definition of deduction-eligible income for purposes of calculating FDII, eliminating the use of a corporation’s deemed tangible income return. It also removes the use of net deemed tangible income return in calculating GILTI. As a result of these changes, the terms FDII and GILTI will be replaced with “foreign-derived deduction eligible income” and “net CFC tested income,” respectively.
BEAT: OBBBA increases the base-erosion and anti-abuse tax (BEAT) rate from 10% to 10.5%.
Business Interest Limitation: Under OBBBA, the Section 163(j) business interest limitation will be calculated prior to the application of any interest capitalization provision.
Administrative Provisions and Excise Taxes
Third-party Network Transaction Reporting Threshold: The bill restores the previous Form 1099-K reporting threshold, requiring third-party settlement organizations to report only if a participating payee’s total transactions exceed $20,000 and the number of transactions exceeds 200 in a calendar year. This reverses the phasedown that was set to lower the threshold to $600 beginning next year.
Form 1099 Reporting Threshold: OBBBA increases the information-reporting threshold for certain payments to persons engaged in a trade or business and payments of remuneration for services to $2,000 in a calendar year (from $600), with the threshold amount to be indexed annually for inflation in calendar years after 2026.
Firearms Transfer Tax: OBBBA reduces the Section 5811 transfer tax on certain firearms.
Farmland Sales: The bill adds a new Section 1062 that allows income tax resulting from the sale of farmland to a qualified farmer to be paid in four annual installments.
Remittance Transfer Tax: The bill imposes a 1% tax on remittance transfers, with the tax applied to the individual or entity sending the funds. A remittance transfer for these purposes is a transfer of cash, a money order, a cashier’s check, or a similar physical instrument. It does not include funds withdrawn from an account held with a financial institution or charged to a credit or debit card.
Under Section 919(g) of the Electronic Fund Transfer Act, a remittance transfer is an electronic transfer of funds requested by a sender to a designated recipient that a remittance transfer provider initiates. A remittance transfer provider is any person or financial institution that provides remittance transfers for consumers in the normal course of its business, whether or not the consumer holds an account with the financial institution.
Employee Retention Credit Enforcement: OBBBA imposes new due diligence requirements on promoters of the Employee Retention Credit (ERC), mandating that they verify a taxpayer’s eligibility and the accuracy of the claimed credit amount. A $1,000 penalty applies for each instance of non-compliance. The bill also extends the penalty for excessive refund claims to employment tax refunds. Furthermore, OBBBA bars the IRS from paying any additional unpaid ERC claims under Section 3134 unless the claim was filed on or before January 31, 2024.
SSN Requirements: The bill imposes an SSN requirement for claiming the American Opportunity or Lifetime Learning credit under Section 25A.
OBBBA represents a significant shift in the business tax landscape, offering new opportunities while phasing out or tightening others. Interested taxpayers can find a side-by-side comparison of the Senate and House versions of the bill here.
As guidance continues to emerge, businesses should evaluate how these changes affect their operations, investment strategies, and long-term planning. This remains a fluid situation, and we are continuing to learn more about the final provisions in the law. We will keep you updated as new information becomes available. Contact your Stephano Slack tax manager or partner at 610-687-1600 or TaxInfo@StephanoSlack.com to discuss your situation.
Author John J. Loughlin, Jr., CPA, Partner, leads the Tax & Advisory Services Department at Stephano Slack. He specializes in tax compliance, planning, and projections. His expertise and personalized approach enable clients to navigate complex tax matters with confidence, ensuring peace of mind and optimal outcomes. John can be contacted at 610-710-4045 or jloughlin@stephanoslack.com.
Source: Tax provisions in the One Big Beautiful Bill Act. Alistair M. Nevius, J.D., Journal of Accountancy. June 29, 2025 Updated: July 4, 2025.
Disclaimer: This content is for informational purposes only and doesn’t constitute professional advice.
Recent Comments