Key Businesses Summary of the OBBBA

The One Big Beautiful Bill Act (OBBBA, P.L. 119‑21) was signed into law on July 4, 2025 and provided a many significant tax policy changes for businesses.

Permanent Business Rate and QBI Deduction

Qualified Business Income (QBI) deduction

• Sec. 199A remains permanent and unchanged, offering up to 20%† deduction on pass-through income.

Bonus Depreciation & Section 179 Expensing

• 100% bonus depreciation is permanently restored for property acquired after January 19, 2025 (Sec. 168(k)), with a phase‑out beginning in 2026
• Section 179 expensing cap doubled—from $1.25M to $2.5M, effective immediately Business

R&D Expense Expensing

• Mandatory amortization of domestic research & experimental (R&E) expenditures is repealed. Businesses may now deduct R&E costs immediately, or elect to amortize over five years starting with taxable years after December 31, 2024
• Non-domestic R&D must still be capitalized over 15 years

Qualified Small Business Stock (QSBS) Expansion

• For stock acquired after July 4, 2025, the QSBS gain exclusion cap increased to the greater of $15M or 10× basis, up from a prior $10M cap.
• New graduated exemption tiers: 50% tax-free after 3 years, 75% after 4, and 100% after 5 years of holding, encouraging earlier company liquidity events

International Tax Changes

• The OBBBA renames GILTI to Net CFC Tested Income (NCTI) and FDII to Foreign‑Derived Eligible Income (FDDEI).
• The deduction rate increased to 40% for NCTI and 33.34% for FDDEI for tax years after December 31, 2025.

Business Credits and Deductions

• The Paid Family & Medical Leave Credit (Sec. 45S) becomes permanent (12.5–25% of qualifying employee wages for up to 12 weeks).
• Certain employer-sponsored meal expenses (e.g., on fishing vessels) become fully deductible after 2025, rather than limited to 50%.
• Dependent Care  Assistance Exclusion (IRC § 129) permanently increased to $7,500, with child & dependent care credit rate boosted to 50% (effective 2026).

Planning Considerations & Next Steps

• Asset Acquisitions - Leverage high Section 179 and bonus depreciation limits now–through 2029
• R&D Spending - Decide between full expensing or five-year amortization elections
• Equity Compensation / QSBS - Consider timing of stock issuances and hold periods to maximize tax-free exclusions
• International Operations - Reevaluate foreign income structuring under updated NCTI/FDDEI rules
• Family Leave Programs - Employers may benefit from the now‑permanent leave credit—act proactively
• Employee Benefits - Increase employer‑provided dependent care benefits where applicable

Mid‑year strategy sessions should be considered and determine how best to manage and prepare for the effects of these changes.

We will continue to monitor IRS and Treasury guidance as these new provisions are implemented. Please reach out at 603-329-6408  if you’d like individualized tax planning or projections based on your specific circumstances.