Key Tax Changes for Businesses Under the One Big Beautiful Bill

Enacted on July 4, 2025, the One Big Beautiful Bill (OBBB) has several important implications for businesses’ federal tax liability going forward. While several of the changes made by the OBBB provide opportunities for significant tax savings, businesses (and their owners) may see an increase in their tax liability in certain areas as well. Learn more from New Jersey tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group:

What New Jersey Business Owners Need to Know About the One Big Beautiful Bill

Immediate Expensing for Domestic Research and Development (R&D) Costs

One of the headline features of the OBBB for businesses is the restoration of immediate expensing for domestic research and development (R&D) costs. These are referred to as “specified research or experimental” expenditures (or “SREs”) under Section 174 of the Internal Revenue Code. To qualify for immediate expensing (and for expensing in general), SREs must be related to a company’s trade or business, and they must be true R&D expenses in the scientific sense.

Businesses with gross receipts of $31 million or less can also retroactively expense their SREs through 2022. Businesses with gross receipts of more than $31 million can accelerate their remaining deductions for R&D during 2022, 2023 and 2024 over one or two years.

Restoration of 100 Percent Bonus Depreciation for Short-Term Investments

The OBBB also restores 100 percent bonus depreciation for qualifying short-term business investments. This applies to assets acquired and placed into service after January 19, 2025. The statute also establishes a new 100 percent bonus depreciation option for qualifying domestic manufacturing facilities built between January 19, 2025 and December 31, 2028, provided that they are placed into service by 2031 (in most cases).

Elimination of Clean Electricity Production and Investment Credits

Under the OBBB, the existing clean electricity production and investment credits are being eliminated for projects placed into service after 2027, subject to certain exceptions. These exceptions apply to projects undertaken before July 4, 2026 that involve geothermal, hydropower, nuclear and other baseload power sources.

Extension of the Clean Fuel Production Credit

While the OBBB phases out the federal clean electricity production and investment credits, it extends the federal clean fuel production credit through the end of 2029. It also expands eligibility for the credit based on more business-friendly emissions computations, subject to restrictions for certain sustainable aviation fuels.

Increase in the Phase-In Range for Section 199A Pass-Through Deductions

The OBBB makes the Section 199A pass-through deduction permanent and increases the phase-in range by $50,000 for individual business owners ($100,000 for those who file joint returns). This is the deduction that allows qualifying owners of sole proprietorships, partnerships, and S corporations to exclude a portion of their income when calculating their individual tax liability.

These are just examples of some of the key changes for businesses (and business owners) under the OBBB. Going forward, business owners and executives will need to be careful to ensure compliance, and they will need to work with their finance departments and tax counsel to ensure that they can substantiate compliance during an IRS audit if necessary.

Contact New Jersey Tax Lawyer Kevin E. Thorn

Do you need to know more about the OBBB’s tax implications for your business? If so, we invite you to get in touch. To request a call with New Jersey tax lawyer Kevin E. Thorn, Managing Partner of Thorn Law Group, please call 201-842-7696 or inquire online today.