The One Big Beautiful Bill Act (OBBBA), passed by the House of Representatives on May 22, 2025, (215–214–1) and the Senate on July 1, 2025, (51–50, with Vice President JD Vance casting the tie-breaking vote), was finalized by the House on July 3, 2025 (218–214). This budget reconciliation bill extends and modifies key provisions of the 2017 Tax Cuts and Jobs Act (TCJA), which is set to expire on December 31, 2025, and introduces new business tax incentives. This video and article outline the major business tax changes to inform strategic planning for the current year and beyond.
1. Research and Experimental (R&E) Expenditures
- The OBBBA permanently allows immediate expensing of domestic research and experimentation (R&E) rather than five-year amortization for R&E paid or incurred in taxable years beginning after December 31, 2024.
- Businesses with annual gross receipts of $31 million or less are allowed to apply this change retroactively for tax years beginning after December 31, 2021 (allowing the possibility to amend returns).
- Taxpayers with domestic R&E expenses incurred after December 31, 2021, and January 21, 2025, can elect to accelerate the remaining deductions over a one- or two-year period.
2. Bonus Depreciation
- The OBBBA permanently reinstates 100% bonus depreciation for property acquired and placed in service after January 19, 2025.
- Taxpayers are allowed to elect 40% bonus depreciation for qualified property placed in service during the first taxable year ending after January 19, 2025.
3. Qualified Production Property (QPP)
- A 100% deduction can be claimed for the cost of QPP, including real property (defined as any property used in a “qualified production activity”).
- This deduction applies to non-residential real property other than “real property which is used for offices, administrative services, lodging, parking, sales activities, research activities, software development or engineering activities, or other functions unrelated to the manufacturing, production, or refining of tangible personal property.”
- The property must be placed in service between January 19, 2025, and January 1, 2031.
4. Section 179
- The maximum amount a taxpayer may expense under Sec. 179 is increased to $2.5 million, reduced by the amount by which the cost of the qualifying property exceeds $4 million.
- The $2.5 million and $4 million amounts are adjusted for inflation for taxable years beginning after 2025.
- This change applies to property placed in service in taxable years beginning after December 31, 2024.
5. Business Interest Limitation
- The OBBBA permanently reinstates the Sec. 163(j) interest deduction limitation by disregarding deductions allowable for depreciation, amortization and depletion in the calculation of adjusted taxable income.
- This change applies to taxable years beginning after December 31, 2024.
6. Excess Business Losses
- The OBBBA permanently extends the disallowance of a deduction for excess business losses.
- This provision doesn’t change the carryover rule, meaning excess business losses get carried over as net operating losses.
7. Employee Retention Credit (ERC)
- Retroactively bars the IRS from issuing refunds for claims filed after January 31, 2024. This provision is limited to only ERC claims filed for Q3 2021 and Q4 2021 (recovery startup businesses).
- IRS is given an extension from five years to six years to examine claims for the Q3 2021 and Q4 2021. The extended statute of limitations would generally expire on 4/15/28.
- The statute of limitations for taxpayers to amend income tax returns to adjust wage deductions related to ERC claims is extended to six years also to align with the six-year assessment noted above.
8. Clean Energy Tax Credits
- The following is terminated after September 30, 2025:
- Sec. 25E previously owned clean vehicle credit
- Sec. 30D clean vehicle credit
- Sec. 45W qualified commercial clean vehicle credit
- Sec. 6426(k) sustainable aviation fuel credit
- The following is terminated after December 31, 2025:
- Sec. 25C energy-efficient home improvement credit that allows individuals a credit for installing energy-efficient windows, heat pumps and other upgrades.
- Sec. 25D residential clean energy credit that applies to residential installation of solar and other clean energy upgrades; the system doesn’t have to be placed in service by December 31, 2025, but expenditures for the system itself must be made by then.
- The following is terminated after June 30, 2026:
- Sec. 30C alternative fuel vehicle refueling credit
- Sec. 179D energy-efficient commercial buildings deduction (terminated for property the construction of which begins after June 30, 2026
- Sec. 45L new energy-efficient home credit that applies to new homes built to meet Energy Star standards.
- Clean energy production credit under Sec. 45Y and the clean electricity investment credit under Sec. 45E (wind and solar facilities)
- Terminated if placed in service after December 31, 2027, if the construction begins after 12 months of the bill becoming law.
- Projects that start construction within 12 months of the bill becoming law don’t have the December 31, 2027, deadline of having to be placed in service.
- Sec. 45Z
- The OBBBA extends the clean fuel production credit through 2029.
- The small agri-biodiesel credit is revived at $0.20 per gallon through the end of 2026.
9. Qualified Opportunity Zones (QOZs)
- No change to original investments in QOZs having an income event on December 31, 2026. Gains invested before December 31, 2026, retain the December 31, 2026, gain recognition date.
- The program would be made permanent. A new set of QOZs will be selected every ten years beginning on January 1, 2027. Current QOZ designations expire on December 31, 2026, but if those zones meet the requirements, they may be redesignated again as a QOZ.
- To the extent a taxpayer has capital gain that is invested in a QOZ fund, they would be able to defer their gain for five years, and if they hold their investment for at least five years they would be able to increase the basis of the investment by 10% of their deferred gain (30% in the case of an investment in a qualified rural opportunity fund).
- Taxpayers may be able to exclude gains from QOZ investments held for at least 10 years, with special rules applying to investments held for more than 30 years.
10. New Markets Tax Credits
- The OBBBA makes these credits permanent and allows for a five-year carryover of unused limitation.
- Applies to calendar years beginning after December 31, 2025.
11. Employer-Provided Child Care
- Increases the amount of employer-provided childcare credit from 25% to 40% (50% for eligible small businesses) and the maximum credit per taxable year to $500,000 ($600,000 for eligible small businesses), indexed annually for inflation for taxable years beginning after 2026.
- Payments to third-party childcare services would be treated as qualifying childcare spending.
- Applies to amounts paid or incurred after December 31, 2025.
12. Paid Family and Medical Leave Credit
- The credit would be made permanent.
- The credit allows employers to claim non-refundable credits ranging from 12.5% to 25% of the wages paid to workers on paid leave.
- Employers can make an election to have the credit instead be a percentage of premiums for insurance policies that provide paid leave.
- The credit could be claimed for employees who have been employed for a minimum of six months rather than at least one year.
- Applies to taxable years beginning after December 31, 2024.
13. Percentage-of-Completion Method
- The OBBBA expands the contracts eligible to be exempt from the percentage of completion method to cover all “residential construction contracts” as opposed to just “home construction contracts.” This means apartment building and condo developers will be able to use the completed contract method to account for sales.
- This would be effective for contracts entered into after the date of the bill’s enactment.
14. Qualified Small Business Stock
- Gains on qualified small business stocks are to be excluded from gross income on a tiered level. For stock acquired after the bill’s enactment, taxpayers could exclude 50% of their qualifying gains after they have held it for three years, 75% after four years and 100% after five years.
- The measure also would increase the per-issuer cap on the exclusion to $15 million from $10 million and adjust it for inflation beginning in 2027.
- The OBBBA increases the qualified small business gross asset limit to $75 million and adds an annual inflation adjustment for stock issued after the date of enactment of the bill.
15. Corporate Charitable Deduction
- The OBBBA creates a floor of 1% of taxable income for the charitable contribution deduction of a corporation, maintaining the 10% ceiling.
- Excess contributions can be carried forward for five years on a first-in-first-out basis.
- Applies to taxable years beginning after December 31, 2025.
16. Form 1099 Reporting Threshold
- The information-reporting threshold would be increased from $600 to $2,000 and indexed annually for inflation in calendar years after 2026.
- Applies to payments made after December 31, 2025.
Recommendations
Review tax strategies.
Businesses should assess how increased deductions (e.g., Section 199A, Section 179, bonus depreciation) and R&E expensing impact current year tax liabilities. Small businesses with prior R&E expenses should explore retroactive refund opportunities, being cognizant of the Section 461(l) loss limitation rules.
Plan investments.
Consider utilizing bonus depreciation and other incentives to accelerate capital investments before phaseout deadlines, including exploring investments in newly designated QOZs.
Monitor state and local tax (SALT) and pass-through entity tax (PTET) impacts.
Evaluate state tax strategies to maximize SALT deductions within the new cap. Review PTET elections to plan for phaseouts of SALT deductions to optimize tax outcomes.
Manage business interest deductions.
Review debt structures to ensure interest expenses align with more favorable adjusted taxable income calculations.
Watch this video for an in-depth discussion on key OBBBA provisions.
