One Big Beautiful Bill—Business Tax Changes

By: Brandon Allfrey, CPA & Squire Tax Partner

New tax rules will affect individuals and businesses after the One Big Beautiful Bill Act (OBBBA) was signed into law on July 4, 2025. The Senate had made several significant changes to the original legislation proposed by the House of Representatives to extend and enhance some of the tax benefits from the Tax Cuts and Jobs Act (TCJA) enacted in 2017 that were scheduled to expire at the end of 2025. The House vote approved the changes, and President Trump signed the bill into law.

Several important updates and changes to tax law will impact individuals and businesses. On July 22, 2025, we hosted a seminar to discuss the impact of this new law on you. You can watch the recording here. Here are some of the key provisions of the new act we discussed:

Key Provisions – Business Taxpayers

• Bonus depreciation:Permanently extends additional first-year (bonus) depreciation deduction. The allowance is increased to 100% for property acquired and placed in service on or after Jan. 19, 2025, as well as for specified plants planted or grafted on or after that date.
• 179 expensing:The bill increases the maximum amount a taxpayer may expense under Sec. 179 to $2.5 million, reduced by the amount by which the cost of qualifying property exceeds $4 million.
• Research-and-development expenses:The bill allows taxpayers to immediately deduct domestic research or experimental expenditures paid or incurred in tax years beginning after Dec. 31, 2024. However, research or experimental expenditures attributable to research that is conducted outside the United States will continue to be required to be capitalized and amortized over 15 years under Sec. 174.

Small business taxpayers with average annual gross receipts of $31 million or less will generally be permitted to apply this change retroactively to tax years beginning after Dec. 31, 2021. And all taxpayers that made domestic research or experimental expenditures after Dec. 31, 2021, and before Jan. 1, 2025, will be permitted to elect to accelerate the remaining deductions for those expenditures over a one- or two-year period.

• Limitation on business interest:Reinstates the EBITDA limitation under Sec. 163(j) for tax years beginning after Dec. 31, 2024. Therefore, for purposes of the Sec. 163(j) interest deduction limitation for these years, adjusted taxable income would be computed without regard to the deduction for depreciation, amortization, or depletion. The bill would also modify the definition of “motor vehicle” to allow interest on floor plan financing for certain trailers and campers to be deductible.
• Qualified small business stock: The bill increases the Sec. 1202 exclusion for gain from qualified small business stock. For qualified small business stock acquired after the date of enactment of the bill and held for at least four years, the percentage of gain excluded from gross income will rise from 50% to 75%. If it is held for five years or more, the exclusion percentage will go up to 100%
• Opportunity zones:Makes opportunity zones permanent but with several changes, including narrowing the definition of “low-income community.” The changes would generally take effect Jan. 1, 2027.
• Excess business losses:Makes Sec. 461(l)(1) limitation on excess business losses of noncorporate taxpayers permanent. It was scheduled to expire after 2028.
• Employer-provided credit: The bill increases the amount of qualified  expenses taken into account for purposes of the Sec. 45F employer-provided  credit from 25% to 40%. The maximum amount of the credit increases from $150,000 to $500,000 ($600,000 for eligible small businesses) and will be adjusted for inflation.
• Paid family and medical leave credit:Under the bill, Sec. 45S is amended to make the employer credit for paid family and medical leave permanent.
• Special depreciation allowance for qualified production property:The bill allows an additional first-year depreciation deduction equal to 100% of the adjusted basis of “qualified production property.” Qualified production property is generally nonresidential real property used in manufacturing.
• Advanced manufacturing investment credit:Under the bill, the advanced manufacturing investment credit rate increases from 25% to 35%, effective for property placed in service after Dec. 31, 2025.
• New markets tax credit:Makes the Sec. 45D new markets tax credit permanent.
• Third-party network transaction reporting threshold:Reverts to the prior rule for Form 1099-K reporting, under which a third-party settlement organization is not required to report, unless the aggregate value of third-party network transactions with respect to a participating payee for the year exceeds $20,000 and the aggregate number of such transactions with respect to a participating payee exceeds 200. The threshold had been phasing down and was scheduled to be $600 starting next year.
• Form 1099 reporting threshold:The bill increases the information-reporting threshold for certain payments to persons engaged in a trade or business and payments of remuneration for services to $2,000 in a calendar year (from $600), with the threshold amount to be indexed annually for inflation in calendar years after 2026.

Key Provisions – International Tax

• Deemed paid credit: Amends Sec. 960(d)(1) to increase the deemed paid credit for Subpart F inclusions from 80% to 90%.
• GILTI and FDII:The bill decreases the Sec. 250 deduction percentage for tax years beginning after Dec. 31, 2025, to 33.34% for foreign-derived intangible income (FDII) and 40% for GILTI, resulting in an effective tax rate of 14% for both FDII and GILTI. The bill also proposes changing the definition of deduction-eligible income for purposes of determining FDII. The bill also eliminates the use of a corporation’s deemed tangible income return for determining FDII and the use of net deemed tangible income return in determining GILTI. These changes result in the elimination of the terms FDII and GILTI, which will be renamed “foreign-derived deduction eligible income” and “net CFC tested income,” respectively.
• BEAT:Increases the base-erosion and anti-abuse tax (BEAT) rate from 10% to 10.5% (the Senate Finance Committee version would have increased it to 14%). Other BEAT changes that were included in the Senate Finance Committee version have been eliminated.
• Business interest limitation:Provides that the Sec. 163(j) business interest limitation will be calculated prior to the application of any interest capitalization provision.

There are more provisions, but these are the key issues impacting most taxpayers.

It is imperative for taxpayers to approach these changes with caution. There are specific details in these provisions that need administrative guidance from the IRS. Additionally, some provisions have extended qualifications for certain taxpayers. To discuss your specific tax situation and the application of the new law, please contact us.