July 4, 2025 wasn’t just the last Independence Day before the United States’s upcoming Semiquincentennial. It was also a historic day because it cemented one of the biggest pieces of legislation in recent history. The formerly named One Big Beautiful Bill Act (OBBBA) — now simply called “The Act” — passed the Senate on July 1, the House on July 3, and was signed into law by President Trump on the 4th of July.
The Act covers a lot of ground, touching on everything from American defense in the Arctic to a program protecting radiation exposure victims. Because it’s such a massive piece of legislation, a lot of people are left wondering what applies to them.
If you’re a founder or business owner, it certainly introduces some changes into the way you get taxed. The Act has about 400 pages of tax provisions alone. To help you manage all of the forthcoming adjustments, we’re giving you a quick overview of some of the biggest business provisions.
Changes to R&D expenses (Section 174)
Under the Tax Cuts & Jobs Act (TCJA), businesses were required to start amortizing their R&D expenses in 2022. The Act does away with that amortization requirement.
Note that this provision only applies to domestic R&D expenses, which can now be deducted in the year they’re incurred. Foreign R&D expenses still need to be amortized over 15 years.
More good news for businesses that have less than $31 million in average gross receipts. The Act extends a provision that will let you amend returns for tax years 2022–2024. That means you can potentially fully and immediately claim deductions for R&D expenses you had amortized over those tax years.
The Treasury Department is working on the implementation of the Act, so the specifics about how that tax return amendment will work is still forthcoming. But it could provide a notable financial benefit for small companies that do a lot of domestic R&D, including startups.
Changes to qualified small business stock (QSBS) (Section 1202)
Section 1202 allows individual shareholders to exclude qualified small business stock from capital gains taxes.
The Act notably shifts how QSBS works in a few distinct ways:
- Larger annual caps: Any stock issued before the enactment date (July 4, 2025) is still subject to the $10 million maximum for capital gains exclusion. Moving forward, though, the cap on stock that was issued after the Act’s enactment date goes up to $15 million. And that ceiling will get indexed for inflation from 2027 on.
- New holding period rules: Before, shareholders needed to hold onto their stock for at least five years to qualify for Section 1202 tax treatment. The Act introduces new tiered holding period requirements:
-
- If you hold the stock for three years, you qualify for a 50% exemption
- If you hold the stock for four years, you qualify for a 75% exemption
- If you hold the stock for five years or longer, you qualify for a 100% exemption (up to the applicable annual cap)
For qualifying small businesses that offer stock, these changes should benefit founding members and make it easier to entice investors.
Pass-through business income deduction
For pass-through entities (e.g., LLCs, S-corps), things were about to change for their qualified business income deduction. But the Act preserves the Section 199A deduction that was about to expire — and makes it permanent.
That means pass-through entities can continue applying the 20% deduction in perpetuity.
The end of most green energy incentives
In an effort to make up for the loss of tax revenue that many of these tax provisions will bring about, green energy incentives were largely slashed by the Act. That’s particularly true for the green tax credits in the Inflation Reduction Act of 2022.
Many of the cut incentives apply to residential green energy applications. Still, companies should note that the qualified commercial clean vehicle credit and the deduction for energy-efficient commercial buildings are on their way out.
Other business provisions in the Act
More business taxation changes are tied up in the Act, including — but by no means limited to — the following:
- Bonus depreciation on business property: The Act extends the 100% bonus depreciation on some business property that was laid out in the TCJA. That means businesses can now expense 100% of the qualified asset for the year in which it was put into service. The bonus depreciation applies to any eligible business property you buy after January 19, 2025.
- Business interest deduction: Under the TCJA, businesses had to use Earnings Before Interest and Taxes (EBIT)-based calculations starting in 2022. Under the Act, businesses can now permanently use the calculation based on Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) to figure out their business interest deduction limit. The Act sets the business interest deduction cap at 30% of EBITDA and makes that cap permanent.
- New threshold for qualifying for charitable contribution deduction: The Act includes a 1% floor for charitable contribution deductions. In other words, the giving needs to exceed 1% of the corporation’s taxable income to qualify for a deduction.
Looking ahead: Implementation of the Act
This is only a very brief overview. The Act contains a lot of provisions that will impact the way businesses get taxed in America. What’s more, we don’t have the brass tacks just yet. Now that the Act has been enacted, it falls to the Treasury Department to implement it. A lot of the fuzzy areas in the legislation will be clarified as the Treasury goes to work there.
For now, business owners and finance officers should stay tuned. Working closely with your accountant can help you prepare for changes that are already certain to be implemented. And it helps you stay informed about adjustments you might need to make as the Treasury rolls out implementation.
Clearly, a lot of complexity lies ahead. If you want help navigating it, talk to our team here at ShayCPA. We’re working diligently to stay on top of all of the Act’s changes and to help our clients comply with them. For guidance to stay on top of and compliant with all of this, contact us.
Disclaimer:
The content provided on this blog is for general informational purposes only and does not constitute professional accounting, tax, or legal advice. Reading or accessing this material does not create a CPA-client relationship, nor should it be construed as a substitute for individualized guidance from a qualified professional. While we strive for accuracy, Shay CPA PC makes no warranties—express or implied—about the completeness, reliability, or timeliness of the information, and we expressly disclaim liability for any errors or omissions. You should not act or refrain from acting based on any blog content without seeking the advice of a qualified CPA or other professional who can address your specific circumstances. Links to external resources are provided for convenience only and do not imply endorsement. Shay CPA PC is under no obligation to update this content and disclaims responsibility for decisions made in reliance on it.
