One Big Beautiful Bill Act – Impact on Businesses

On July 4, 2025, the One Big Beautiful Bill Act (OBBBA) was signed into law, enacting sweeping changes to the federal tax code with significant implications for businesses.

Key Federal Tax Law Changes Affecting Businesses

1. Bonus Depreciation: 100% Expensing Made Permanent

• Change: OBBBA makes 100% bonus depreciation permanent for qualified business property, reversing the scheduled phase-down under prior law. Businesses can immediately expense the full cost of eligible new and used property placed in service after January 19, 2025, with a transitional election for reduced percentages in 2025.
• Planning: Consider accelerating capital expenditures into 2025 to maximize immediate deductions. Review current and planned asset acquisitions to ensure they qualify for bonus depreciation, and coordinate with your cost segregation studies to identify eligible property.

2. Section 179 Expensing: Increased Limits

• Change: The annual expensing limit under Section 179 increases to $2.5 million, with a phase-out threshold at $4 million, both indexed for inflation after 2025.
• Planning: For smaller businesses, Section 179 may be preferable to bonus depreciation, especially for property not eligible for bonus depreciation or for partial-year acquisitions. Evaluate the interplay between Section 179 and bonus depreciation to optimize deductions.

3. Research and Development (R&D) Expenses: Full Expensing for Domestic R&D

• Change: Domestic R&D expenditures can now be fully expensed in the year incurred, rather than amortized over five years. Foreign R&D remains subject to 15-year amortization.
• Planning: Businesses with significant R&D activities should review their accounting methods and consider accelerating domestic R&D spending into 2025 to take advantage of immediate expensing.

4. Paid Family and Medical Leave Credit: Expanded and Made Permanent

• Change: The credit for paid family and medical leave is now permanent and expanded to include insurance premiums and certain state/local paid leave programs.
• Planning: Review your leave policies and consider whether offering or expanding paid leave could generate or increase your tax credit.

5. Employer-Provided Child Care Credit

• Change: The credit is increased to 40% (50% for small businesses) of qualified expenses, with higher annual limits and expanded eligibility.
• Planning: Consider establishing or expanding child care benefits to attract and retain employees while reducing tax liability.

6. Qualified Small Business Stock (QSBS) Gain Exclusion

• Change: The QSBS exclusion is now phased in: 50% after 3 years, 75% after 4 years, and 100% after 5 years for new stock, with higher per-issuer and asset limits.
• Planning: For startups and investors, consider the timing of stock issuance and holding periods to maximize the exclusion. Review entity structure and capitalization plans.

7. Excess Business Loss Limitation

• Change: The limitation on excess business losses for noncorporate taxpayers is made permanent, with inflation-adjusted thresholds.
• Planning: Monitor business losses and plan for potential limitations on deductibility, especially for pass-through entities and their owners.

• Planning: Multinational businesses should review their global structure, intercompany financing, and foreign tax credit positions. The changes may affect the effective tax rate and require new compliance processes.

Oregon-Specific Considerations

• Pass-Through Entity Elective (PTE-E) Tax: Oregon’s PTE-E tax remains available, allowing partnerships and S corporations to pay state income tax at the entity level, providing a workaround to the federal $10,000 SALT deduction cap. The OBBBA does not change this, but increased federal deductions may affect the relative benefit.

Practical Planning Suggestions for 2025

1. Accelerate Capital Investments: Take advantage of 100% bonus depreciation and increased Section 179 limits by placing assets in service before year-end.
2. Review R&D Activities: Maximize immediate deductions for domestic R&D and consider shifting foreign R&D to the U.S. where feasible.
3. Enhance Employee Benefits: Consider expanding paid leave and child care benefits to leverage new and enhanced credits.
4. Monitor Loss Utilization: Track business losses and plan for the permanent excess business loss limitation.
5. Prepare for Increased Reporting: Enhanced credits and deductions come with new compliance and reporting requirements—ensure systems are updated and staff are trained.

Future Considerations

• Stay Informed: The OBBBA introduces new rules and reporting requirements that may evolve with future guidance.
• Coordinate with Advisors: Work closely with tax, legal, and accounting advisors to implement strategies and ensure compliance.
• Document Positions: Maintain thorough documentation for all tax positions, especially for credits, deductions, and international tax matters, to prepare for increased audit activity.

Conclusion

The OBBBA presents significant opportunities and challenges for business taxpayers. Proactive planning and timely action in 2025 can help maximize tax benefits and minimize risks. Please contact our office to discuss how these changes affect your business and to develop a tailored action plan.