On July 4, 2025, President Trump signed into law the One Big Beautiful Bill Act (OBBBA)—a sweeping reconciliation package that permanently reshapes key aspects of U.S. tax law for corporations, partnerships, and business owners. While much attention has focused on individual tax relief, the business provisions in OBBBA are just as consequential.
From the return of 100% bonus depreciation to permanent changes in research deductions and international taxation, the bill offers both immediate planning opportunities and long-term structural implications.
Why OBBBA Matters for Businesses
Many provisions from the 2017 Tax Cuts and Jobs Act (TCJA) were set to expire in 2025, including full bonus depreciation, favorable interest limitation rules, and the 20% pass-through deduction. OBBBA not only preserves many of these but expands them in several areas—while eliminating or phasing down incentives tied to clean energy production and manufacturing.
Businesses operating in sectors like manufacturing, tech, services, or international trade will need to reassess depreciation strategies, research expenditures, compensation planning, and pass-through entity structures heading into 2026.
Major Business Tax Provisions
1. Bonus Depreciation Returns to 100%
- Restores 100% first-year bonus depreciation for qualified property placed in service after January 19, 2025.
- Previously scheduled to phase down to 20% by 2026.
- Applies to both new and used property with a recovery period of 20 years or less.
Planning Insight: With full expensing back on the table, companies may consider front-loading capital investments into late 2025 and 2026 to maximize immediate deductions.
2. Section 179 Expensing Expanded
- Cap increased to $2.5 million, with phaseout beginning at $4 million, effective after December 31, 2024.
- Retains the advantage over bonus depreciation for states that decouple from federal rules.
Planning Insight: Especially important for businesses with significant state tax exposure or looking to expense capital in a state-conforming manner.
3. R&D Deduction Permanently Restored
- Creates new Section 174A that allows immediate expensing of domestic research and experimentation (R&E) costs retroactively effective after December 31, 2024.
Foreign R&E still subject to 15-year amortization. - Taxpayers that made domestic research or experimental expenditures after December 31, 2021, and before January 1, 2025, may elect to accelerate the remaining deductions for such expenditures over a one-year period or ratably over a two-year period.
- Allows retroactive application to 2022 and 2023 for small businesses (under $31M average annual receipts). The election to retroactively apply this change must be made by July 4, 2026 (within one year of the date of enactment).
Planning Insight: Startups and software companies that have capitalized R&D costs may be eligible to amend prior returns and claim refunds.
4. Interest Limitation Rules Return to EBITDA
- Business interest deduction limit is now calculated using earnings before interest, taxes, depreciation, and amortization (EBITDA), not EBIT.
- Effective for tax years beginning after December 31, 2024.
Planning Insight: This change restores interest deductibility for asset-heavy businesses—particularly beneficial to real estate, construction, and capital-intensive industries.
5. Excess Business Loss (EBL) Rule Made Permanent
- EBL thresholds for 2025 are $626,000 (joint) and $313,000 (single).
- Losses exceeding those thresholds are converted to Net Operating Losses (NOLs), subject to an 80% income limitation.
- EBL rules had been set to expire in 2028.
Planning Insight: Owner-operators of flow-through entities should model expected losses and carryforward limitations in multi-entity structures.
6. Executive Compensation Cap Tightened
- The $1 million cap on deductible executive compensation for covered employees of public corporations is now applied at the controlled group level (across related companies).
- Applies to tax years beginning after December 31, 2025.
Planning Insight: Private equity firms, holding companies, and companies with multiple entities must revisit compensation planning to ensure defensibility.
7. Qualified Production Property Deduction
- Allows 100% deduction for costs associated with “qualified production property”. Qualified production property is nonresidential real property that is used by the taxpayer as an integral part of a qualified production activity. A qualified production activity is the manufacturing, production, or refining of qualified products, and the term production is limited to agricultural and chemical production. To qualify, the property has to be placed in service in the United States, or its territories, and the original use must begin with the taxpayer.
- Available for assets constructed after January 19, 2025 and before January 1, 2029, and placed in service between enactment and January 31, 2031.
- Excludes food and beverage produced and sold in the same location.
Planning Insight: Manufacturers should accelerate production facility investments and analyze asset eligibility for this lucrative deduction.
8. Clean Energy Incentives Rolled Back
- Terminates most green energy credits after 2025, including:
- Section 45Y and 48E (clean electricity)
- 25D (residential solar)
- 30D and 45W (electric vehicles)
- Several credits were grandfathered for projects under construction by mid-2026.
Planning Insight: Developers and tax equity investors must reassess project timelines, PPA structures, and compliance documentation.
9. Qualified Opportunity Zones (OZs) Made Permanent
- Beginning in 2027, OBBBA introduces a rolling 10-year OZ designation.
- Reinforces eligibility guidelines and anti-abuse provisions.
Planning Insight: Investors can expect more clarity and continuity in OZ planning. However, Treasury is expected to release new compliance guidance.
10. Employee Retention Credit (ERC) Enforcement
- No new ERC claims allowed for Q3 and Q4 2021 if filed after January 31, 2024.
- IRS has six years to review affected claims.
- Employers denied ERC can claim income tax refunds tied to wage deductions.
Planning Insight: Businesses with pending or denied ERC claims should review amended returns and coordinate audit defense strategies.
11. Net Controlled Foreign Corporation Tested Income (GILTI)
- The new legislation renames the GILTI regime to “Net CFC Tested Income Regime” and will make permanent a 40% deduction (down from the prior law of 50%) for global intangible low-taxed income (GILTI), resulting in a sustained effective tax rate of 14% on such income (after considering the GILTI FTC “haircut” change that goes from 20% to 10%).
- Net CFC tested income will no longer include a tax shield for a 10% return on Qualified Business Asset Investment (QBAI).
Planning Insight: Businesses may need to reassess asset placement and capital investment strategies abroad and should model the impact and explore ways to optimize deductions and credits.
12. Foreign-Derived Deduction-Eligible Income (FDDEI)
- The new legislation renames FDII to FDDEI and will make permanent a 33.34% deduction (down from the prior law of 37.5%) for FDDEI, resulting in a sustained effective tax rate of 14% on such income.
- Qualified Business Asset Investment (QBAI) has been removed from FDII calculation.
Planning Insight: This simplifies the calculation and broadens eligibility, especially for service-based and IP-heavy businesses
13. Qualified Tips Deduction (“No tax on tips”)
- Individuals can claim an income tax deduction of up to $25,000 on their personal tax returns for qualified tips received in tax years 2025 through 2028.
- Employers must report qualified tip amounts on the employee’s W-2.
- “Qualified tips” are cash tips received by an individual in an occupation that customarily and regularly received tips on or before December 31, 2024. Note that “Cash tips” are tips received from customers that are paid in cash or charged.
- “Qualified tips” also include tips received under a tip-sharing arrangement, but earnings from mandatory service charges assessed automatically to customers are not “Qualified tips”.
Planning Insight: If not already tracking qualified tips by employees, start now. If your customer bills currently include mandatory service charges, you may want to revisit this practice, as these are not considered ‘qualified tips’ for the deduction.
Additional Highlights
- Pass-through Entity Tax (PTET) workaround preserved.
- Payments to partners (Section 707(a)(2)) no longer need regulations to be self-enacting.
- 1099 reporting thresholds for payments made after December 31, 2025, are increased to:
- $2,000 for Form 1099-NEC and 1099-MISC. These threshold amounts will be adjusted for inflation for calendar years after 2026.
- $20,000 and 200 transactions for Form 1099-K.
What This Means for Business Owners
Whether you’re a tech founder capitalizing R&D, a manufacturer purchasing new equipment, or a real estate investor facing interest deductions, OBBBA provides clarity—and opportunity. However, with phase-in dates starting in 2025 and sunset provisions for clean energy credits, timing and documentation are everything.
We recommend:
- Reviewing your fixed asset plan for late 2025 acquisitions.
- Amending prior-year returns for eligible R&D costs.
- Modeling interest deductions under EBITDA vs EBIT.
- Preparing for tighter executive compensation caps across entities.
- Coordinating with your Aura team on QBI structuring and state-level conformity.
Aura Advisors Takeaway
The One Big Beautiful Bill Act brings long-awaited permanency to core business tax rules while opening the door for strategic acceleration in depreciation, R&D spending, and production investment. Businesses should act quickly to align tax strategy with the law’s structure—and avoid leaving money on the table.
To discuss the impact on your business’ tax position, reach out today.
Aura Advisors is a boutique tax consulting and compliance firm working with start-ups, emerging growth companies, and affluent individuals. Making it safer for good people and good companies to continue to do good things.