The One, Big, Beautiful Bill Act (OBBBA) includes numerous provisions affecting the tax liability of U.S. businesses. For many businesses, the favorable provisions outweigh the unfavorable, but both are likely to impact your tax planning. Here are several provisions included in the new law that may influence your business's tax liability. Additional articles in this series are forthcoming to address additional provisions.

Qualified business income (QBI) deduction

The Tax Cuts and Jobs Act (TCJA) created the Section 199A deduction for QBI for owners of pass-through entities (such as partnerships, limited liability companies and S corporations) and sole proprietorships. The deduction had been slated to expire after 2025, putting many business owners at risk of higher taxes.

The OBBBA makes the QBI deduction permanent. It also expands the deduction limit phase-in ranges for specified services, trades or businesses, and other entities subject to the wage and investment limitation. For these businesses, the deduction is reduced when taxable income falls within the phase-in range and is eliminated when taxable income exceeds the range. Previously, the phase-in range for the wage and property limitations (and for the exclusion of specified service trades or businesses, or SSTBs) was $50,000 above the income threshold for single filers and $100,000 for joint filers. The OBBBA increases these ranges to $75,000 and $150,000, respectively, and indexes them for inflation after 2026. This means more taxpayers will be able to claim the deduction, and higher-income taxpayers in service businesses may benefit before the deduction phases out.

The OBBBA also adds an inflation-adjusted minimum QBI deduction of $400, beginning in 2025. It's available for taxpayers with at least $1,000 of QBI from one or more businesses in which they materially participate.

Accelerated bonus depreciation

The OBBBA makes permanent 100% first-year bonus depreciation for the cost of qualified new and used assets acquired and placed into service after January 19, 2025. Under the TCJA, the deduction was limited to 40% for 2025, 20% in 2026 and 0% in 2027.

The new law also introduces a 100% deduction for the cost of "qualified production property" (generally, nonresidential real property used in manufacturing) placed into service after July 4, 2025, and before 2031. In addition, the OBBBA increases the Sec. 179 expensing limit to $2.5 million and the expensing phaseout threshold to $4 million for 2025, with each amount adjusted annually for inflation.

Together, the depreciation changes are expected to encourage capital investments, especially by manufacturing, construction, agriculture and real estate businesses. Additionally, the permanent 100% bonus depreciation may alleviate the pressure on companies that didn't want to delay purchases despite the smaller deduction.

Research and experimentation expense deduction

Beginning in 2022, the TCJA required businesses to amortize Sec. 174 research and experimentation (R&E) costs over five years if incurred in the United States or 15 years if incurred outside the country. With the mandatory mid-year convention, deductions were spread out over six years. The OBBBA permanently allows the deduction of domestic R&E expenses in the year incurred, starting with the 2025 tax year.

The OBBBA also allows "small businesses" (those with average annual gross receipts of $31 million or less) to claim the deduction retroactively to 2022. Any business that incurred domestic R&E expenses in 2022 through 2024 can elect to accelerate the remaining deductions for those expenditures over a one- or two-year period in the years beginning after December 31, 2024.

Clean energy tax incentives

The OBBBA eliminates many of the Inflation Reduction Act's clean energy tax incentives for businesses, including the:

  • Qualified commercial clean vehicle credit,
  • Alternative fuel vehicle refueling property credit, and
  • Sec. 179D deduction for energy-efficient commercial buildings.


The law accelerates the phaseouts of some incentives and moves up the project deadlines for others. The expiration dates vary. For example, the commercial clean vehicle credit can't be claimed for a vehicle acquired after September 30, 2025, instead of December 31, 2032. However, the alternative fuel vehicle refueling property credit doesn't expire until after June 30, 2026.

Qualified Opportunity Zones

The TCJA established the Quality Opportunity Zone (QOZ) program to encourage investment in distressed areas. The program generally allows taxpayers to defer the gain on the sale or exchange to an unrelated party if the gain is invested in a qualified opportunity zone within 180 days of the sale. The OBBBA creates a permanent QOZ policy that builds off the original program.

The new program includes stricter eligibility criteria, new reporting requirements, penalties for noncompliance, and a new category of fund, Qualified Rural Opportunity Fund. The gain is now excluded from gross income until the earlier of (1) the date on which the investment is sold or exchanged or (2) five years from the date the investment in the QOF was made. Additionally, if the investment is held for at least five years, the basis in the investment is stepped up by 10 percent (30% if the investment is in a Qualified Rural Opportunity Fund). The first round of QOFs available under the permanent policy will begin on January 1, 2027.

The OBBBA also introduces a new type of QOF for rural areas. Investments in such funds will receive triple the step-up in basis.

International taxes

The TCJA added several international tax provisions to the tax code, including deductions for foreign-derived intangible income (FDII) and global intangible low-taxed income (GILTI). It also established the base erosion and anti-abuse tax (BEAT) on certain large U.S. corporations.

The OBBBA makes permanent the FDII and GILTI deductions and adjusts the effective tax rates for FDII and GILTI to approximately 14%. It also makes permanent the minimum BEAT, increasing the tax rate to 10.5%. These changes take effect beginning in 2026.

Employer tax provisions

The new law makes permanent the exclusion from gross income (for employees) and from wages for employment tax purposes (for employers) for employer payments of student loans. It also provides that the maximum annual exclusion of $5,250 be adjusted annually for inflation after 2026.

In addition, the OBBBA permanently raises the maximum employer-provided child care credit from 25% to 40% of qualified expenses, up to $500,000 per year. (For eligible small businesses, these amounts are 50% and up to $600,000, respectively.) The maximum dollar amount will be adjusted annually for inflation after 2026.

The OBBBA also makes permanent the employer credit for paid family and medical leave (FML) after 2025. Employers will also be allowed to claim the credit for a portion of premiums for paid FML insurance.

Employee Retention Tax Credit

If you filed an Employee Retention Tax Credit claim after January 31, 2024, you may not see your expected refund. The OBBBA bars the IRS from issuing refunds for certain claims submitted after that date. It also gives the IRS at least six years from the date of filing to challenge these claims.

Other provisions

The OBBBA increases the limit on the business interest deduction by excluding depreciation, amortization and depletion from the computation of adjusted taxable income (ATI), starting in 2025. The deduction is generally limited to 30% of ATI for the year.

The new law also makes permanent the excess business loss limit, which was set to expire in 2029. And it permanently extends the New Markets Tax Credit, which was scheduled to expire in 2026.

What's next?

Since the OBBBA is simply extending or making relatively modest modifications to existing tax law, it probably won't result in the years-long onslaught of new regulations and IRS guidance that followed the TCJA's enactment. We will keep you informed about any new developments.