INSIGHT

How the One Big Beautiful Bill Act is expected to affect businesses

July 24, 2025

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The One Big Beautiful Bill Act (OBBBA) has officially become law, bringing sweeping changes to the tax landscape that will significantly impact businesses across the country. As you navigate these new provisions, understanding which changes matter most for your business is crucial for effective tax planning and strategy. 

While much of the coverage focuses on large-scale provisions that affect multinational corporations, many of the most impactful changes actually benefit smaller and mid-sized businesses.  

Let’s look at the key provisions that are most likely to affect your business operations and bottom line. 

100% bonus depreciation returns permanently 

The OBBBA delivers substantial wins for businesses making capital investments by permanently extending bonus depreciation at 100% for property acquired and placed in service on or after January 19, 2025. This means you may qualify for immediate deduction of the full cost of qualifying equipment, machinery, and other business assets rather than depreciating them over several years. 

This provision is particularly valuable for businesses planning equipment purchases or facility improvements. The immediate write-off can significantly reduce your current tax liability while improving cash flow for reinvestment. 

Special manufacturing depreciation allowance 

A new provision allows 100% first-year depreciation for qualified production property used in manufacturing. If your business involves manufacturing, agricultural, chemical and certain other operations, this could provide immediate tax benefits for facility investments and production equipment. This is a temporary provision, so check the placed-in-service dates. 

Section 179 expensing limits increase significantly 

The maximum Section 179 expensing amount increases to $2.5 million for years beginning after 12/31/2024, with the phase-out beginning when qualifying property costs exceed $4 million. This enhancement provides additional flexibility for businesses to immediately expense equipment purchases that don’t qualify for bonus depreciation. 

This increased limit means more businesses can take advantage of immediate expensing for equipment, vehicles, and other qualifying property, providing substantial first-year tax benefits for capital investments. 

Business interest deduction limitations revert to EBITDA 

The legislation reinstates the EBITDA limitation under Section 163(j) for tax years beginning after December 31, 2024. This means adjusted taxable income will be computed without regard to depreciation, amortization, or depletion deductions, effectively increasing the amount of business interest you can deduct. 

The EBITDA calculation is further modified by new legislation to exclude certain income, deduction, or adjustment items under Subpart F Income, GILTI, any associated gross-up, and certain foreign-sourced dividends. 

This change is particularly beneficial for businesses with significant debt financing, as it allows for larger interest deductions compared to the current EBIT-based limitation. The return to EBITDA-based calculations can provide meaningful tax savings for leveraged businesses. 

Payments from Partnerships to Partners for Property or Services 

The change impacts partners’ characterization of the distributions to those that render services to a partnership vs those receiving special allocations in return for property contributions, and situations involving disguised sales. 

Effective Date: Applies to services performed and property transferred after July 4, 2025. 

Qualified small business stock benefits increase substantially 

The OBBBA enhances the Section 1202 exclusion for qualified small business stock (QSBS), which can provide significant tax advantages for business owners and investors: 

• Stock held for at least three years: exclusion is 50%  
• Stock held for at least four years: exclusion increases from 50% to 75% 
• Stock held for five years or more: exclusion increases to 100% 

In addition, the gross asset test increased from $50 million to $75 million. These changes apply to qualified small business stock acquired after the bill’s enactment date, making it an important consideration for business formation and investment strategies. Therefore, for qualifying C corporations, this represents a substantial opportunity for tax-free growth and exit strategies. 

Pass-through entity tax workaround remains intact  

One of the most important developments for partnerships and S corporations is that the OBBBA preserves the pass-through entity tax (PTET) workaround without any new limitations. Originally, the House version included restrictions that would have limited accounting firms and other specified service businesses from using this strategy. However, these limitations were removed from the final legislation, making the PTET deduction available to all qualifying flow-through entities. 

PTET workaround strategy continues 

Since 2017, smart tax planning for flow-through entities like partnerships and S corporations has involved a workaround to the SALT limitation. Here’s how it works: 

When a partnership or S corporation generates $100,000 of income that flows to an individual owner on their form K-1, that owner would traditionally pay state taxes on their individual return – subject to the individual SALT cap limitation. However, most states have approved an alternative approach where the business entity, making the appropriate election, pays the state taxes directly and takes the deduction at the entity level. 

This means the state tax payment becomes a business deduction that flows through to owners above the line on their form K-1, avoiding the individual SALT cap limitation. The entity-level payment and deduction effectively converts what would have been a limited personal deduction into an business expense. 

Research and development expense changes provide relief 

The OBBBA allows businesses to immediately deduct domestic research and experimental expenditures paid or incurred in tax years beginning after December 31, 2024. However, research conducted outside the United States must still be capitalized and amortized over 15 years. Small business taxpayers with average annual gross receipts of $31 million or less can apply this change retroactively to tax years beginning after December 31, 2021. Guidance on how to make this retroactive change for the years 2022 through 2024 is forthcoming from the IRS. Stay tuned.  Additionally, all taxpayers can elect to accelerate remaining deductions for domestic R&D expenditures made between 2022 and 2024 over a one- or two-year period. 

Enhanced employee benefit credits support workplace programs 

The OBBBA significantly enhances several employee benefit credits that can reduce your business tax liability while improving employee satisfaction. 

Employer-provided childcare credit expansion 

The employer-provided childcare credit increases substantially: 

• Qualified childcare expenses credit rises from 25% to 40% (50% for eligible small businesses) 
• Maximum credit increases from $150,000 to $500,000 ($600,000 for eligible small businesses) 
• Credit amounts will be indexed for inflation 

Permanent paid family and medical leave credit 

The employer credit for paid family and medical leave becomes permanent, providing ongoing tax benefits for businesses that offer these employee benefits. 

Administrative changes affect reporting requirements 

Several administrative provisions will impact business operations by reducing compliance burden: 

• Form 1099-K reporting reverts to the $20,000 threshold (with 200+ transactions) 
• General Form 1099 reporting threshold increases from $600 to $2,000, indexed for inflation after 2026 

Planning considerations for implementation 

As you evaluate these changes, consider the following strategic approaches after properly understanding the new law: 

• Consider the timing of equipment purchases to take advantage of enhanced depreciation benefits 
• Review entity structures to optimize pass-through tax benefits and SALT deduction strategies 
• Evaluate QSBS planning for qualifying businesses and investment strategies 
• Consider R&D activities to optimize the domestic versus foreign research expense treatment 
• Review employee benefit programs to leverage enhanced credits 

The OBBBA represents a significant opportunity for businesses to reduce tax liability while supporting growth initiatives. However, the complexity of these provisions requires careful planning and professional guidance to maximize benefits while maintaining compliance. 

Take action on your business tax strategy 

The One Big Beautiful Bill Act creates numerous opportunities for tax savings and strategic planning. However, navigating these complex provisions requires thorough analysis of your specific business situation. 

Our tax professionals can help you understand how these changes impact your business and develop strategies to maximize the benefits. Contact BPM today to discuss how the OBBBA affects your tax planning and business operations.