President Trump signed the One Big Beautiful Bill Act (OBBBA) into law on July 4, bringing sweeping tax changes for businesses. The legislation builds on key provisions from the 2017 Tax Cuts and Jobs Act (TCJA), while introducing several new benefits aimed at reducing business tax burdens and encouraging investment, manufacturing, and innovation.The following highlights the new or modified provisions, but it is not an exhaustive list.
100% bonus depreciation is back
Under prior law, bonus depreciation was scheduled to phase out, reaching 0% by 2027. The new law permanently restores 100% bonus depreciation for eligible property placed in service on or after Jan. 19, 2025. This change allows businesses to fully deduct the cost of qualifying equipment and other assets in the year of purchase, substantially improving cash flow. The section 179 expensing provision limit is boosted to $2.5 million, indexed for inflation, with a phase-out beginning at $4 million for the cost of qualifying property.
Additionally, a new provision for bonus depreciation was added that allows for 100% deduction for real property directly related to domestic manufacturing, but only for property beginning construction after Jan. 19, 2025, and placed in service before Jan. 1, 2030.
Qualified small business stock exclusion expanded
The updated rules for Qualified Small Business Stock (QSBS) under Section 1202 offer expanded tax benefits for investors. Now, capital gains on QSBS can be excluded on a tiered basis: 50% for stock held over three years, 75% after four years, and a full 100% exclusion after five years. These changes apply to stock issued or acquired after the law takes effect. The per-issuer gain cap increases from $10 million to $15 million, with inflation adjustments starting in 2027. Additionally, companies can now qualify as small businesses with up to $75 million in gross assets (up from $50 million), also indexed to inflation beginning in 2027.
Expanded R&D expensing
Domestic research and development costs incurred beginning after Dec. 31, 2024, can now be fully expensed rather than amortized. Additionally, an election can be made to expense unamortized domestic R&D costs over one or two years, starting for tax years after Dec. 31, 2024. This permanently reverses the TCJA provision that required domestic R&D expenses to be capitalized and amortized over five years. Foreign R&D expenses are still required to be capitalized and amortized over 15 years. Businesses must still comply with documentation and accounting method requirements, with further guidance on implementation expected from the Treasury.
Interest limitation calculation reverts to EBITDA
Another important shift: the new law permanently returns the business interest deduction limitation to an EBITDA-based calculation for tax years beginning after Dec. 31, 2024. Previously, the calculation was basically based on EBIT, but now with the law change, businesses can add back depreciation, depletion, and amortization to the interest limitation calculation, thus potentially increasing the deductible amount of interest expense.
The new rule requires businesses to calculate the interest deduction limit before applying any rules that require interest to be capitalized, except in two specific cases: interest related to straddles (IRC 263(g)) and self-produced property (IRC 263A(f)). This change significantly reduces planning opportunities that previously allowed businesses to capitalize interest into inventory, property, or accounts receivable under provisions like IRC 266 or IRC 263A. In short, businesses will have less flexibility to shift interest expenses to the balance sheet to preserve deductibility.
Reforms to international taxation
Under the new rules for multinational businesses, the Section 250 deduction now allows a 40% deduction for GILTI — renamed Net CFC Tested Income (NCTI) — and a 33.34% deduction for FDII, now called Foreign-Derived Deduction Eligible Income (FDDEI). Both NCTI and FDDEI are permanent reductions and are effective Jan. 1, 2026. The prior benefit of the “net deemed tangible income return,” which reduced GILTI and FDII, has been eliminated. The BEAT (Base Erosion and Anti-Abuse Tax) rate also permanently increases to 10.5%.
Additionally, businesses face tighter limits on using deductions to offset foreign income. Only deductions directly tied to NCTI may be used for the foreign tax credit, and FDDEI can no longer be reduced by interest or R&D expenses, which narrows the potential tax benefits.
Other notable business tax law changes
- Establishes a 1% floor on corporate charitable deductions
- Makes the 20% passthrough entity deduction permanent
- Limits disallowance of on-premises meal deductions starting in 2026
- Makes the excess business loss provisions permanent
- Terminates many of the clean energy tax incentives previously introduced by the Inflation Reduction Act
What is not in the OBBBA
- No corporate tax rate changes, nor a separate domestic manufacturer rate
- No changes to deductibility of pass-through entity taxes, nor a corporate state and local tax limitation
- No changes to the controversial carried interest provisions
- No corporate “retaliation” tax, which would have penalized foreign tax regimes deemed aggressive
We’re here to help
The new tax law significantly enhances many of the TCJA’s most business-focused provisions, while adding new incentives aimed at capital investment, research, and manufacturing. Whether you own a small local business or operate internationally, these updates may offer new opportunities for savings and planning. Reach out to your Mowery & Schoenfeld tax advisor to discuss how these changes may impact your business.