ARTICLE | July 09, 2025

 

Congress just rewrote the rulebook with the One Big Beautiful Bill Act, locking in the 20 % pass-through deduction, reviving 100 % bonus depreciation, freeing domestic R&D costs for immediate write-off, and dialing back the interest-expense straitjacket—all while tightening cross-border and clean-energy rules. For savvy owners and CFOs, the law is a fast-track to cash-flow wins; for the unprepared, it’s a maze of state mismatches and new compliance traps. Dive into our full article below to see where the biggest tax savings—and hidden pitfalls—await your business.

Introduction and Background

In July 2025, Congress passed the One Big Beautiful Bill Act (often shortened to OBBBA). Signed into law shortly after by President Trump, the new legislation marks one of the most significant shifts in U.S. tax policy since the Tax Cuts and Jobs Act (TCJA) of 2017. Unlike narrower-focused bills of the past, the OBBBA broadly reshapes federal tax law by making permanent certain provisions from the TCJA, adjusting business expense rules, revising research and development cost treatment, tackling clean-energy tax breaks, and fine-tuning tax regimes on income from cross-border transactions.

For businesses, these changes are both exciting and challenging. Many long-established tax practices—like writing off capital purchases over several years—have received fresh treatment, while other provisions have been refined or curtailed. At its core, the OBBBA represents a new era, one promising strategic advantages for proactive organizations but also raising compliance hurdles that require careful attention.

This article explores the key business tax revisions within the OBBBA, explaining how they present both opportunities and pitfalls. Organizations of all sizes—C corporations, pass-through entities, real estate investors, and global enterprises—could be impacted. From 100% bonus depreciation restorations to the permanent extension of the TCJA pass-through deduction, we aim to clarify how these changes fit together, what might be required to comply, and where careful, proactive planning can yield the greatest benefits.

Key Business Tax Revisions Under OBBBA

A. Permanent Extension of Core TCJA Provisions

Under the TCJA, numerous business-friendly provisions broadened how organizations could deduct expenses, structure operations, and plan for growth. However, many of those measures were scheduled to expire, creating taxpayer uncertainty. The OBBBA eliminates this uncertainty in several key respects.

One of the biggest changes is the permanent extension of the Qualified Business Income (QBI) deduction, also known as the Section 199A deduction. Introduced by the TCJA, the QBI deduction generally allows pass-through entities—such as S corporations, partnerships, and sole proprietorships—to deduct up to 20% of their qualified business income. Under the old timeline, these benefits were set to expire at the end of 2025. The OBBBA locks them in indefinitely, relieving pass-through owners from the concern that their 20% deduction might vanish.

It’s important to note that for owners running “specified service trades or businesses” (such as consulting or professional services), certain limitations still apply. However, the thresholds for reducing or eliminating the deduction on qualified income have also been adjusted upward, allowing more high-income business owners—depending on the nature of the enterprise—to harness the benefits fully.

Additionally, the TCJA introduced a cap on excess business losses (EBL), restricting the amount of business-related losses that could be used to offset other income. The OBBBA lifts the temporary timeline on those rules, making the EBL limitation permanent. Now, pass-through entity owners must continue to keep close track of business losses, net operating losses, and how those losses can be applied across their broader portfolio of income.

B. 100% Bonus Depreciation and Expensing

One of the most headline-grabbing elements of the OBBBA is the restoration of 100% bonus depreciation for qualified assets. Under TCJA rules, businesses enjoyed the ability to fully expense many categories of property—like machinery, equipment, and certain property improvements—in the year the assets were placed in service. But that 100% amount was set to phase down over time (to 80%, 60%, and so forth). The OBBBA resets the allowance to a full 100% immediate expense for items placed in service after January 19, 2025, with no built-in sunset that moves it backward again.

A related measure, Section 179 expensing, has also been expanded. Section 179 allows businesses to deduct the cost of certain property and equipment up to a set threshold, rather than capitalizing those costs. The OBBBA raises both the deduction and phase-out thresholds for Section 179, giving small and midsize businesses more flexibility to expense major purchases in a single year. This benefit complements 100% bonus depreciation by allowing organizations to pick which approach is most advantageous based on asset mix and timing.

Real estate investors and construction-heavy industries may also see relief via the act’s “Qualified Production Property” clause, which introduces an accelerated depreciation scheme for certain facilities, especially those that manufacture, refine, or handle domestic production. While this won’t apply to all taxpayers, those engaged in large-scale, capital-intensive operations should investigate whether their projects fit under this new category for favorable tax treatment.

C. Research & Development (R&D) Tax Benefits

Under earlier law, the TCJA required many domestic R&D expenses to be capitalized and amortized instead of immediately deducted. While that rule’s goal was to spread out the government’s cost for lucrative R&D benefits, it posed a significant burden on money-intensive startups and tech companies that depended on the immediate write-off to keep cash flow healthy.

The OBBBA rescinds the mandatory capitalization model for domestic R&D expenses, effectively reversing the more restrictive approach. Now, domestic research outlays can once again be expensed in the year incurred. This is a major win for U.S.-based innovation. Many small businesses and established industries alike should find it easier to pursue new workflows, experimental projects, or pioneering technology without fear that the associated research costs would be locked into a long-term write-off schedule.

It’s worth noting, however, that foreign R&D expenses will continue to be amortized over 15 years, reflecting an ongoing federal priority to encourage stateside innovation. Additionally, for companies that started capitalizing R&D expenses in 2022 or 2023, there’s a chance to revisit those prior returns, coordinate with the safe harbors, and potentially accelerate unamortized costs. This retroactive fix can materially improve tax positions for companies that are heavy on R&D spending.

D. Payroll Changes

Beginning in 2026, employees who receive tips or work overtime will be able to claim new deductions, turning every pay-stub into a retention story for employers nimble enough to recode their systems quickly. Add a permanent paid-family-and-medical-leave credit and an expanded dependent-care FSA limit, and payroll suddenly wields many of HR’s most powerful engagement tools. The directive is clear: update withholding tables, build new W-2 boxes, and embed compliance inside user-friendly interfaces—then mine the data to advise Finance on cash-flow timing, HR on benefit design, and the C-suite on workforce strategy.

E. Interest Deduction Modifications

Shortly after the TCJA, the IRS adopted stricter calculations on the amount of business interest expense that organizations could deduct, using what’s known as Section 163(j). Initially, taxpayers benefitted from calculating this limit based on earnings before interest, taxes, depreciation, and amortization (EBITDA). More recent law changed that definition to exclude depreciation and amortization from the calculation—reducing the amount of deductible interest.

The OBBBA returns to the more favorable EBITDA approach permanently. That means businesses, especially capital-intensive ones with high depreciation deductions, can now use a higher figure as part of their interest limitation calculation. This shift can be a game-changer for real estate, construction, heavy manufacturing, and any other sector that traditionally carries more debt and invests heavily in machinery or facilities.

F. Clean Energy Rollbacks Impacting Businesses

The OBBBA unwinds or shortens many of the tax incentives for clean energy that were ramped up in the past few years. Businesses hoping to take advantage of generous credits for solar, wind, or related projects may now see accelerated phaseouts, an earlier cutoff for certain investments, or more stringent eligibility criteria.

One notable area is Section 179D deductions (for energy-efficient commercial buildings), which will now expire for projects that begin construction after a specific date. Companies in the real estate development or property management fields should carefully check OBBBA’s deadlines to avoid losing out on deductions they are counting on.

While many programs still permit partial credit or phased expansions until their final expiration date, organizations should forecast carefully, ensuring that plans to integrate renewables or efficiency aren’t financially compromised.

G. International and Cross-Border Changes

Global intangible low-taxed income (GILTI) and the foreign-derived intangible income (FDII) regime remain a significant area of focus for multinational corporations. The TCJA originally created GILTI to deter the offshoring of intangible assets. OBBBA further modifies and refines GILTI, including changes to deduction rates and foreign tax credit rules. The legislation also renames FDII to “foreign-derived deduction eligible income” (FDDEI), lowers the deduction percentage, and recalibrates the system for calculating intangible income.

Similarly, the Base Erosion and Anti-Abuse Tax (BEAT) applies to large corporations that make deductible payments—interest, royalties, or certain services—to foreign affiliates. Under OBBBA, the BEAT rate is permanently set at a level slightly higher than before, and certain compliance provisions have been updated. All of these add up to more complexity in cross-border planning and heightened interactions with foreign tax credit calculations.

Opportunities and Tax-Planning Strategies

Amid these extensive changes, savvy business owners still have many ways to turn the OBBBA’s revisions to their advantage. A key starting point is assessing your entity structure. For newly established businesses, deciding between C corporation status or a pass-through entity can shift the tax equation dramatically now that the QBI deduction is permanent. Owners of established S corporations and partnerships might consider restructuring or reclassifying certain operations if they can secure a better outcome under the new law.

Next, capital-intensive businesses—such as manufacturers, transport and logistics, and even smaller firms with major equipment needs—may want to revisit acquisition schedules. With 100% bonus depreciation back on the table, the timing of equipment purchases and expansions becomes critical. Coupled with Section 179 expansions, these allowances could transform a multi-year capital expenditure plan, front-loading substantial write-offs to reduce near-term taxable income.

The R&D front also offers a compelling incentive to reevaluate innovation strategies. With immediate expensing restored, companies that rely on intangible development or software production can potentially free up more internal cash. Some organizations may benefit from systematically reviewing older returns to see if previous capitalization of research expenses can be adapted or amended retroactively, increasing current-year cash flow and fueling further R&D.

Likewise, the more lenient interest deduction rules demand a fresh look at your balance sheet. If your business operates in a space that requires capital financing—commercial real estate, for example—the pivot to EBITDA-based limits expands how much interest you can write off. However, increased leverage always comes with commercial risk, so balancing your financing strategy and the tax benefits is wise.

Potential Challenges & Compliance Concerns

Although these opportunities are welcome, they come with complexity. Federal laws do not automatically trickle down to states, so conformity issues can arise. Some states might adopt OBBBA changes, while others could ignore them or run them through partial adjustments. Businesses operating in multiple states will need to track how each jurisdiction treats the expanded depreciation rules or whether it disallows certain pass-through deductions.

In addition, record-keeping hurdles may jump significantly. For instance, with the shift in R&D expensing, the IRS may want to see clearer documentation around which costs are truly “domestic” or “foreign,” as the latter remain subject to amortization. The same holds true for business interest calculations. Proving the correct EBITDA figure can involve more robust documentation around depreciation, intangible write-offs, and other relevant factors.

Lastly, the Treasury and IRS are expected to issue volumes of guidance interpreting various OBBBA provisions. Some clarifications may not arrive for months—or even longer—leading to a patchwork of best guesses, safe harbors, and interim rules. During that time, updated forms, instructions, and schedules will gradually appear. Taxpayers who jump on early opportunities without carefully monitoring the official guidance could inadvertently attract scrutiny or need to pivot after final regulations are released.

Preparing for the Future

With the OBBBA, we enter an era that promises greater permanence for many TCJA benefits but adds nuance to established deductions and credits. Organizations would do well to focus on proactive scenario modeling, building out various what-if cases around expansion, R&D outlays, or potential clean-energy investments.

Staying up-to-date on each piece of official Treasury guidance is also essential. Some of the new measures require detailed rulemaking. Any new clarifications can substantially change your overall tax posture if you rely heavily on one big provision—like 100% bonus depreciation or QBI. Beyond that, with major components of the legislation already in effect or phasing in soon, there is little time to be complacent.

How Larson Gross Can Help

Navigating the OBBBA’s extensive changes can be daunting. Whether you operate a small family business with an S corporation structure, a larger pass-through operation, or a multinational corporation with sizable R&D activities, Larson Gross is here to provide trusted insights and strategies.

As part of our Individual & Business Tax Planning services, we look beyond standard tax compliance. We take a holistic view of your organization’s entire financial picture, helping to identify new deductions, credits, or entity restructurings that may be available. Our approach includes:

• In-depth Tax Compliance & Preparation: We manage individual and business tax returns across various entities. The OBBBA’s changes are integrated into how we evaluate your returns, ensuring you take advantage of newly permanent provisions or boosted expensing rules right away.
• Proactive Planning & Consulting: From dissecting whether a C corp might serve you better than an S corp to exploring cost segregation studies for real-estate-based investments, we guide you with a personalized plan.
• Multi-State & International Tax Counseling: Because state and cross-border conformity can vary drastically, we help identify potential pitfalls and opportunities in each region or country where you operate. We bring clarity on GILTI, FDDEI, and foreign tax credit changes if your business has a global reach.
• Long-Term Advisory & Ongoing Support: Legislative changes are rarely single events. We keep you informed of updated Treasury rulings and regulations that might influence your tax strategies or require amendments to filed returns.

By leveraging our expertise, you can be confident in facing the OBBBA landscape, optimizing benefits, and ensuring you remain in compliance with evolving guidelines.

Conclusion

The One Big Beautiful Bill Act has ushered in a new dawn for American businesses. It solidifies much of the TCJA blueprint while adding high-impact revisions designed to spur domestic investment. With expanded 100% bonus depreciation, permanent pass-through deductions, and a favorable pivot on research expenses, the runway for growth appears wide.

However, these new opportunities come hand-in-hand with more intricate regulations, potential state-level mismatches, and the need for vigilant record-keeping. Businesses looking to take full advantage of the OBBBA’s provisions—or simply stay in step with its mandates—must approach tax planning strategically and deliberately.

Larson Gross can help you thrive in this changed tax environment. Our commitment to understanding your unique situation remains at the forefront of everything we do, from compliance to consulting and long-term strategic advice. By addressing your needs with an integrated approach, we empower you to seize opportunities, mitigate risks, and confidently pursue your organization’s goals in the era of the OBBBA.