From reinstating 100% bonus depreciation to reshaping international tax rules, the OBBBA has opportunities for strategic tax planning. Whether you’re investing in R&D, expanding globally, or managing interest deductions, 2025 tax reform could significantly impact your bottom line.
Signed into law on July 4th, 2025, the One Big Beautiful Bill Act (OBBBA) introduces sweeping changes to the US tax code, with a strong focus on revitalizing business investment, innovation, and international competitiveness. Here we summarize key business tax changes resulting from OBBBA and what they mean for your organization.
163(j) Deductions
The OBBBA redefines “adjusted taxable income” under §163(j)to be based on EBITDA (earnings before interest, taxes, depreciation, and amortization), rather than EBIT under current law.
- Effective: Tax years beginning after December 31, 2024.
Bonus Depreciation
The Act reinstates 100% bonus depreciation for eligible property acquired and placed in service after January 19, 2025.
- Impact: Businesses can fully expense eligible capital investments immediately, improving cash flow and encouraging growth.
Research and Development Expenses
The Act reinstates an immediate deduction for domestic research and development (R&D) costs for tax years beginning after December 31, 2024. Businesses with average annual gross receipts of $31 million or less can elect to apply the new deduction rules retroactively to tax years 2022–2024 by amending these returns. All taxpayers may elect to deduct any remaining unamortized domestic R&D expenses from 2022–2024—either all at once in 2025 or ratably over 2025 and 2026. Foreign research costs, however, associated with research conducted outside the US must continue to be capitalized and recovered over 15 years.
NCTI, formerly GILTI
The “net CFC tested income” (NCTI) replaces the global intangible low-taxed income (GILTI). The effective tax rate has been increased to 12.6% for taxable years beginning after December 31, 2025. The OBBBA eliminates the GILTI deduction for the deemed 10% return on qualified business assets and limits the allocation and apportionment of certain deductions—including all interest and R&D expenses—to net controlled foreign corporation tested income (NCTI) for foreign tax credit limitation purposes, thereby alleviating a burdensome aspect of the prior GILTI regime.
FDDEI, formerly FDII
The foreign-derived intangible income (FDII) has been renamed to “foreign-derived deduction eligible income” (FDDEI). The effective tax rate has increased to 14% for taxable years beginning after December 31, 2025.
BEAT Made Permanent at Lower Rate
The OBBBA permanently sets the BEAT rate at 10.5 percent for taxable years beginning after December 31, 2025.
The Takeaway
The OBBBA shifts U.S. tax policy to stimulate domestic investment, reward innovation, and enhance global competitiveness. By restoring full expensing for capital investments, reintroducing immediate R&D deductions, and simplifying international tax rules, the Act provides meaningful opportunities for businesses to improve cash flow and reduce tax burdens.
Given the higher tax rates on foreign income and the permanent establishment of the BEAT regime, businesses must now prioritize strategic tax planning to safeguard profitability and maintain global competitiveness.
Organizations should act swiftly to understand the implications and leverage the benefits, especially those eligible for retroactive R&D deductions.
Engage with your TaxOps Advisor to tailor a proactive strategy aligned to your business goals under the new tax landscape.
Disclaimer: This content is for educational purposes only and is not intended, nor should it be relied upon, as legal, tax, accounting or investment advice. You should consult with a competent professional to discuss specifics of your situation and the applicability of the information presented.
Read more
- Auditor Independence in the Age of Private Equity: What CFOs Need to Know
- R&D Credits for Software Companies: Scrum Teams, Qualifiers, and Section 174 After OBBBA
- Section 174 Decoupling: What Tax Pros Need To Know State By State
- TaxOps Welcomes Sean Espy as Partner, Tax Minimization
- Your Tax Footprint Is Probably Bigger Than You Think: What Finance Leaders Need to Know About State Nexus
Recent Comments