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What the One Big Beautiful Bill Act Means for Business Taxes

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Signed into law on July 4, 2025, H.R. 1, also known as the One Big Beautiful Bill Act (OBBBA), makes sweeping changes to the federal tax code, with significant implications for businesses of all sizes. Below, we break down the key provisions impacting business taxation and outline areas where companies may find new opportunities, or face new challenges, under the updated rules.

20% Pass-Through Deduction Made Permanent

Owners of pass-through entities (such as S corps, partnerships and sole proprietorships) can continue deducting 20% of qualified business income indefinitely. This deduction was previously set to expire after 2025. Income from certain Specified Service Trade or Businesses still may be limited to a limitation on the amount of the deduction.

Expanded Expensing for Equipment & Capital Purchases

  • 100% bonus depreciation is restored and made permanent, allowing businesses to fully expense the cost of qualifying new equipment in the year it’s placed in service.
  • The Section 179 expensing cap doubles—from $1 million to $2.5 million—with the phase-out threshold increasing to $4 million.

Expensing for Production Property

A new provision allows certain nonresidential real estate used for manufacturing or production to qualify for 100% expensing. This applies to construction beginning between 2025 and 2028 and placed in service before 2034, offering a unique planning window for manufacturers.

International Tax Changes

The legislation did not include the previously proposed “revenge tax,” but does include some moderate changes to the GILTI, FDII and BEAT tax regimes.

Opportunity Zone Extension

The bill reintroduces Opportunity Zone incentives for investments made after 2026, with updated reporting requirements and compliance standards expected to be released in forthcoming Treasury guidance.

R&D Expensing

Domestic R&D expenses can once again be deducted in full in the year incurred, reversing the prior 5-year amortization rule. R&D expenses incurred in foreign jurisdictions are still required to be capitalized and amortized over a 15 year period. There will be an opportunity for some taxpayers to elect to expense prior capitalized R&D expenses from prior years.

Other Key Business Provisions

To help offset the bill’s cost, several clean energy credits from prior legislation begin phasing out sooner than expected.

A favorable change to the interest expense deduction limitation now uses EBITDA (rather than EBIT) in its calculation, allowing many companies to deduct more interest starting in 2025.

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Our Speaker:

David Patton, Partner, Frazier & Deeter Advisory, LLC

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