New tax law creates major planning opportunities – R&D, bonus depreciation, and corporate rates shift, with key deadlines looming.
When new legislation rolls out, especially one as sweeping as the recently passed One Big Beautiful Bill Act, there’s a lot of excitement, confusion, and critical need for interpretation.
Stambaugh Ness’ recent webinar, available now, breaks down what we know so far, and, most importantly, what your business should be doing next.
We’re still early in the implementation phase, and while the intended changes to tax law are clear, the devil is in the details, as the saying goes. We now need to look to rule makers to clarify and provide procedural steps for implementation. That said, here’s a recap of the key insights you need to know.
A quick history: How we got here.
The groundwork for this bill dates to the 2017 Tax Cuts and Jobs Act, which introduced a variety of business and individual tax cuts, many of which were set to sunset by the end of 2025. The new bill resets the playing field, making many of those expiring provisions permanent and introducing changes across business and individual taxation, incentives, and expensing.
What’s staying.
TCJA provisions made permanent:
- Flat corporate rate: The 21 percent flat corporate tax rate remains and is now permanently codified, replacing the old graduated system.
- ACA penalty repeal: The Affordable Care Act penalty tax is permanently removed.
- Expanded deduction landscape: Several key TCJA tax provisions (R&D expensing, bonus depreciation, and qualified business income deductions) are now permanent fixtures.
R&D expensing: Game-changer for innovation investment.
One of the biggest wins in the bill is the return of full expensing for domestic research and experimentation, or R&E, starting after December 31, 2024. This allows companies to immediately deduct eligible R&D costs, an enormous cash flow and strategic planning opportunity.
Key elements include:
- Section 174A: Newly introduced for permanent expensing of domestic R&E.
- Section 174 amended: Foreign research costs must still be amortized over 15 years.
- Retroactive opportunity: Small businesses (under $31M in average gross receipts for the prior three years) may choose to amend returns to capture deductions pre-2025.
- Expensing post December 31, 2024:
- Firms over $31M gross revenue threshold can recoup the capitalized expenses on returns filed for tax years beginning after December 31, 2025 either fully in one year, over two years, or over the remaining amortization period.
- Firms under the $31M gross revenue threshold can also elect to recoup the capitalized expenditures in the same manner as large taxpayers (in lieu of amending returns).
Interest expense limitation: Back to EBITDA.
Under IRC section 163(j), businesses can once again calculate interest deductibility based on EBITDA, reversing the shift to EBIT. This is particularly meaningful for capital-intensive and highly leveraged businesses, increasing the amount of deductible interest.
Note: Watch for special considerations if you have a C corp group election; certain international inclusions like GILTI and Subpart F are now excluded from the calculation.
Bonus depreciation and qualified production property:
- Bonus depreciation: Reinstated to 100 percent, but only for property acquired and placed in service after January 19, 2025.
- Qualified production property (new section 168N): Allows 100 percent bonus depreciation for buildings used in qualified manufacturing and production industries, if they’re owner-used and construction begins after January 19, 2025, and before January 1, 2029, and placed in service through 2030.
Cost segregation studies will be more relevant than ever as firms look to accelerate deductions and improve tax positioning.
Section 179 expensing: Increased limits.
The section 179 deduction limit increased to $2.5M, with a phase-out beginning at $4M. This allows for full expensing of a broader range of assets, including some building improvements not eligible under bonus depreciation. Strategically pairing this with cost segregation and bonus depreciation can significantly enhance tax outcomes.
PTET deduction: Still on the table.
Despite concerns, the pass-through entity tax deduction remains intact. This allows certain owners of pass-through entities to deduct state taxes at the entity level, potentially bypassing individual SALT deduction caps. This is still a valuable planning strategy, especially for those in high-tax states.
Other noteworthy provisions:
- Excess business losses for non-corporate taxpayers are now a permanent deferral item, converting to NOL carryforwards.
- Qualified Opportunity Zones have been extended, with new 10-year rolling designations focused more heavily on rural and low-income communities. However, the original QOZ designations ending in 2026 remain unchanged, so planning around gain recognition remains critical.
- Heavy reporting requirements: Starting in 2026, Qualified Opportunity Funds will face significantly more stringent reporting rules with potentially steep penalties for noncompliance.
What else you need to know.
While the headline provisions got much of the attention, several less-publicized but important tax changes are also part of this bill and they could directly impact your business or your personal return.
179D energy efficiency deduction: Not dead, yet.
The 179D deduction for energy-efficient building construction or renovation is still available, but not permanently. Projects that begin construction after June 30, 2026, will no longer be eligible. So, if your project qualifies and construction starts before that cutoff, you can still leverage this powerful deduction. Timing matters, so be strategic about when construction begins.
Green incentives winding down.
Several energy and environmental tax credits are being phased out at a faster-than-expected pace:
- 45L credit (for energy-efficient residential properties): Ends after 2026
- Clean Vehicle Credits (new and commercial): End after September 30, 2025
- Alternative Fuel Vehicle Refueling Property Credit: Ends after June 30, 2026
- Clean Electricity Production & Investment Credits: End after December 31, 2027, for wind and solar
Employee retention credit (ERC) crackdown.
The IRS is barred from making payments on ERC claims for Q3 and Q4 of 2021 that were filed after January 31, 2024. In addition, penalties have been expanded and the statute of limitations extended to six years, a clear signal that enforcement is ramping up.
Planning considerations: What you should be doing now.
While this bill offers significant opportunities, there’s no one-size-fits-all approach. Here’s what we recommend:
1. Model your tax scenarios. Especially around:
- Section 174 R&D: Firms under $31M in average gross receipts will have the option of amending 2022-2024 or to accelerate capitalized expenses in 2025.
- If you are a pass-through entity, evaluation of past distributions and basis considerations are key.
- Bonus and section 179 depreciation: Time your capital expenditures to maximize deductions.
- Overpayments: If you paid high estimated taxes for 2025 based on prior law, consider: Fourth quarter and year-end cash planning will be critical, Roth conversions, accelerated charitable giving, capital gains harvesting, and/or increased retirement contributions.
2. Watch for state nonconformity. Many states may not conform immediately (or at all) to federal changes. SN’s State and Local Tax Advisory team can help you navigate this.
3. Stay cautious on amended returns. Amending past returns can delay refunds, increase IRS scrutiny and potentially shift benefits to different owner groups if there have been ownership changes. Consider your goals before filing.
4. Prepare for IRS delays. Policy guidance is likely to lag. In the meantime, reputable advisors may offer differing interpretations. Patience, modeling, and informed decision-making are key.
Final word: Start planning now. We’re still digesting many of the nuances, and awaiting more IRS guidance, but the direction is clear: this bill brings planning opportunities for businesses that are ready to act. Whether it’s accelerating deductions, evaluating capital investments, or adjusting your tax posture, now is the time to model your scenarios and make confident, informed decisions. Reach out to us today to start a conversation.
Jennifer Nelson, CPA, MBA, is managing director of Tax Strategy & Solutions at Stambaugh Ness. Connect with her on LinkedIn.