Jul 4, 2025
The One Big Beautiful Bill Act is Signed Into Law
On July 4, 2025, the One Big Beautiful Bill Act (the “Bill”) was signed into law during a White House ceremony, marking a pivotal moment in U.S. federal tax policy.
The Bill prevailed in a narrow 218–214 vote in the House of Ways and Means (“House”) following extensive negotiations, strategic amendments across both chambers of Congress, and a high-stakes reconciliation process that concluded with Vice President JD Vance casting the tie-breaking vote in the Senate.
This legislation enacts permanent tax changes, expands select deductions, and introduces key reforms to entitlement programs—all of which carry meaningful implications for businesses, individuals navigating the evolving regulatory landscape.
This legislation opens the door to a wide array of strategic tax planning opportunities. With permanent bonus depreciation, expanded Sec. 179 expensing, and new exclusions for qualified small business stock, it’s designed to encourage domestic reinvestment and facilitate capital formation.
Internationally, the rebranding of GILTI and FDII, simplified foreign tax credit limitations, and favorable treatment of the CFC look-through rule bolster the U.S. as a competitive tax jurisdiction for inbound investment. These provisions streamline compliance and improve predictability—key attributes for foreign investors weighing entry.
For companies considering expansion, recapitalization, or foreign entry into the U.S. market, this bill dramatically reshapes the strategic landscape.
We recommend reviewing current investment timelines, entity structures, and compliance strategies to align with the new tax environment. We can help!
Ready to Optimize Your Strategy?
The One Big Beautiful Bill Act redefines what's possible for growth-minded businesses. From enhanced deductions to investor-friendly provisions, the opportunity to refine your planning has never been clearer.
Strategic Tax Review
Let our team help you assess where expansion, investment, and tax efficiency intersect—whether you're seeking to capitalize on bonus depreciation, boost inbound investment into the U.S., or secure expiring energy incentives.
For more information, contact us.
Below is a brief summary of some of the key business, international, and individual tax provisions in the Bill:
Business Tax Provisions
Provision | Summary | Effective Date / Notes |
Immediate deduction for domestic R&D, including software development. Election to amortize over at least 60 months (some exclusions apply). Election to deduct unamortized domestic R&D paid or incurred in tax years beginning after December 31, 2021 and before January 1, 2025 in first taxable year (2025) or over two tax years. | Tax years beginning after Dec. 31, 2024. | |
One-time election for certain small businesses (≤$31M average annual gross receipts test) to deduct domestic R&D retroactively to tax years beginning after December 31, 2021. | One-time election must be made within one year from July 4, 2025 | |
100% deduction of certain nonresidential real property “qualified production property” used in manufacturing, production, or refining and placed in service after January 19, 2025 and before January 31, 2031. | This provision is elective Limited period for property to be placed in service, other conditions apply. | |
100% deduction of certain tangible property placed in service after Jan. 19, 2025 | Permanent, year 2025 | |
Capital Investments Expensing -Section 179 | Cap raised from $1.25m in 2025 to $2.5M to immediately deduct certain depreciable business assets. Threshold at which deduction begins to phase out increased from $3.13m in 2025 to $4M. | Permanent, for tax years beginning after Dec. 31, 2024 Both cap and threshold adjusted annually for inflation |
Interest Deduction Limitation - Section 163(j) | Returns to EBITDA-based limit; excludes Subpart F, GILTI, Sec. 78 gross-up. Certain capitalized interest treated as subject to Section 163(j). | For tax years beginning after Dec. 31, 2024 |
Residential Construction Contracts | Exception from percentage-of-completion method for certain residential projects | Applies to new contracts after July 4, 2025 |
Paid Leave Credit -Section 45S | Expanded employee eligibility (from 12 months to 6 month of service), added flexibility in calculating credit, and broadened employer’s eligibility. | Permanent, for tax years beginning after December 31, 2025 |
Advanced Manufacturing Credit | Credit rate increased from 25% to 35% for property placed in service after Dec. 31, 2025 | For property placed in service after Dec. 31, 2025 |
Spaceports -Section 142 | Eligible for exempt facility bonds | New classification |
Child Care Credit Section 45F | Credit rate increased to 40%; max credit raised to $500K ($600K for small businesses), indexed for inflation | Effective for amounts paid or incurred after December 31, 2025 |
Opportunity Zones Section 70421 | Made permanent; definition of “low-income community” narrowed, new rural incentives, rolling gain deferral, basis step-up changes. Current zones expire on December 31, 2026, and new zones will be designated every 10 years, starting July 1, 2026, and effective January 1, 2027. | Current zones expire Dec. 31, 2026; new zones to be designated starting Jan. 1, 2027 |
New Markets Credit Section 45D | Made permanent. The progress is designed to encourage private investment in low-income communities | Permanent |
Residential Construction Contracts | Exception from percentage-of-completion method for certain residential projects | For new contracts after July 4, 2025 |
Qualified Small Business Stock (QSBS) Exclusion -Section 1202 | Gain exclusion based on holding period: 3 years: 50% exclusion; 4 years: 75% exclusion; 5+ years: 100% exclusion. Increased per-issuer exclusion cap to greater of $15m (indexed for inflation after 2026) or 10x adjusted basis. Increased aggregate gross asset threshold for QSBS eligibility to $75m (indexed for inflation after 2026). Expanded active business test to include foreign R&D. | For stock acquired after July 4, 2025 |
REIT – Subsidiary Asset Test – Section 856(c) | Increases the limit from 20% to 25% on the value of a REIT’s assets that can be held in securities of one or more taxable REIT subsidiaries | For tax years beginning after Dec 31, 2025 |
Excess Business Losses -Section 461(l) | Limit made permanent; NOL treatment preserved | Permanent |
International Tax Provisions
Provision | Summary | Effective Date / Notes |
GILTI | Rebranded as “net CFC tested income”; QBAI and DTIR (deemed return on foreign investment) removed from calculation. | For tax years beginning after Dec 31, 2025 |
Section 250 Deduction | Decreased from 50% to 40% for GILTI/Net CFC Tested Income Decreased from 37.5% to 33.34% for FDII/Foreign-derived deduction eligible income. Rebranded FDII as “foreign-derived deduction eligible income”; QBAI removed; restrictions of certain transfers of intangible property and depreciable/amotizable/depletion property to qualify for FDII if they occur after June 16, 2025. | For tax years beginning after Dec 31, 2025 |
New Section 951B | Creates a new income inclusion rule for ‘foreign-controlled U.S. shareholders’ in ‘foreign-controlled foreign corporations’ (FCFCs). This parallels existing CFC rules and relies on downward attribution through foreign person, meaning a U.S. person (e.g., a U.S. subsidiary) can be treated as owning stock held by a foreign parent—even without direct or indirect ownership. | For tax years beginning after Dec 31, 2025 |
BEAT - Section 59A | Rate set at 10.5%; credit disallowance removed | For tax years beginning after Dec 31, 2025 |
Foreign Tax Credit - Expense Allocation | Favorable changes to expense allocation; interest and R&D expenses not allocated to net CFC tested income. | For tax years beginning after Dec 31, 2025 |
Foreign Tax Credit – Deemed Paid Credit - Section 960(d) | Deemed paid credit increased from 80% to 90% Section 78 gross-up is correspondingly increased | For tax years beginning after Dec 31, 2025 |
Foreign Tax Credit – Previously Taxed Net CFC Tested Income | 10% of the foreign taxes associated with distributions of previously taxed Net CFC Tested Income are not eligible for credit | Applies to foreign taxes associated with previously taxed 951A inclusions that were included in income after June 28, 2025 |
Foreign Tax Credit – Inventory Sourcing Rule - Section 863(b) | Up to 50% of the income from the sale or exchange of inventory produced in the U.S. and sold by a foreign branch for use outside the U.S. may be treated as foreign-source income. | For tax years beginning after Dec 31, 2025 |
CFC Look-Through Rule - Section 954(c)(6) | The look-through rule for related controlled foreign corporations is made permanent. | For tax years beginning after Dec 31, 2025 |
Downward Attribution of Stock Ownership – Section 958(b)(4) | Restores the pre-2017 rule limiting downward attribution of stock ownership from foreign persons to U.S. persons for purposes of determining controlled foreign corporation (CFC) status | For tax years beginning after Dec 31, 2025 |
Pro-Rata Share Rules for Subpart F Inclusions | Aligns the pro rata share rules for Subpart F income with those for Net CFC Tested Income, so that inclusions are based on periods of ownership during the year rather than solely on year-end ownership | For tax years beginning after Dec 31, 2025 |
Repeal of One-Month Deferral for Specified Foreign Corporations | Eliminates the ability of specified foreign corporations to elect a tax year ending one month later than that of their U.S. parent, thereby aligning the tax year of foreign subsidiaries with their U.S. parent | For tax years of specified foreign corporations beginning after November 30, 2025 |
Sec. 899 “Revenge Tax” | Dropped from final bill | Removed after G7 negotiations |
Foreign R&D - Section 174 | Still amortized over 15 years | No change to current law |
Individual Tax Provisions
Provision | Summary | Effective Date / Notes |
Tax Rates | TCJA rates made permanent | Indexed for inflation |
Standard Deduction | Increased to $15,750 (single), $23,625 (head of household), $31,500 (MFJ) | Retroactive to 2025 |
Senior Deduction | $6,000 deduction for age 65+; phases out at $75K/$150K MAGI | 2025–2028 |
SALT Cap | Raised to $40K in 2025; indexed through 2029; Phase-down begins at $500K MAGI | SALT Cap reverts to $10K in 2030 |
Child Tax Credit | Increased to $2,200 per child; $1,400 refundable portion made permanent | Indexed for inflation |
QBI Deduction (Sec. 199A) | Made permanent at 20%; phase-in thresholds increased | New $400 minimum deduction |
Mortgage Interest Deduction | $750K cap made permanent; home equity interest excluded | Permanent |
Casualty Loss Deduction | Limited to federally or state-declared disasters | Permanent |
Misc. Itemized Deductions | Suspension made permanent; educator expenses excluded from suspension | Permanent |
Pease Limitation | Replaced with 2/37 reduction formula | Applies to high-income taxpayers |
Charitable Deduction | Above-the-line deduction for non-itemizers ($1K/$2K); 0.5% floor for itemizers | Permanent |
Tips Deduction | Up to $25K above-the-line deduction; phases out at $150K/$300K MAGI | 2025–2028 |
Overtime Deduction | Up to $12.5K/$25K above-the-line deduction; MAGI phaseout applies | 2025–2028 |
Car Loan Interest | Deductible up to $10K; final assembly must be in U.S. | 2025–2028 |
Estate & Gift Tax Exemption | Raised to $15M/$30M in 2026; indexed for inflation | Permanent |
Qualified Small Business Stock (QSBS) Exclusion -Section 1202 | See business tax provision section for details on changes. | For stock acquired after July 4, 2025 |
Clean Energy Tax Provisions
Provision | Summary | Termination / Restrictions |
Clean Vehicle Credits (Sec. 25E, 30D, 45W) | Credits for new, used, and commercial clean vehicles | Terminate after Sept. 30, 2025 |
Alternative Fuel Refueling (Sec. 30C) | Credit for refueling property | Ends after June 30, 2026 |
Energy-Efficient Home & Building Credits (Sec. 25C, 25D, 179D, 45L) | Credits for residential and commercial upgrades | Most end Dec. 31, 2025 or June 30, 2026 |
Clean Hydrogen (Sec. 45V) | Credit for hydrogen production | Ends Jan. 1, 2028 |
Sustainable Aviation Fuel (Sec. 6426(k)) | Credit for clean aviation fuel | Ends Sept. 30, 2025 |
Clean Electricity Credits (Sec. 45Y, 48E) | Credits for wind and solar | Terminate for facilities placed in service after Dec. 31, 2027 |
Foreign Entity Restrictions | Credits denied for facilities with material assistance from prohibited foreign entities | Applies to wind, solar, nuclear, and clean fuel projects |
Transferability Rules | Credits remain transferable but subject to foreign entity compliance | Buyers must meet FEOC standards |
Excise Tax on Non-Compliant Projects | Up to 50% penalty for wind and 30% for solar projects violating sourcing rules | Applies after 2027 |
Carbon Sequestration (Sec. 45Q) | Credit retained but restricted for foreign-influenced entities | Applies to post-enactment facilities |
Nuclear Power Credit (Sec. 45U) | Credit denied for foreign-controlled facilities or imported fuel | Effective post-enactment |
Clean Fuel Production (Sec. 45Z) | Extended through 2029; foreign feedstocks prohibited | Emissions rules tightened |
Advanced Manufacturing (Sec. 45X) | Wind component eligibility ends after 2027; metallurgical coal added | Phaseouts begin 2031–2033 |
Residential Solar (Sec. 48E) | Eligibility reinstated under tech-neutral regime | Must meet placed-in-service or commence-construction rules |
How We Can Help
Given the significant changes and new provisions introduced in the bill, it is imperative that businesses plan ahead, assess the potential impact, and identify strategic opportunities and incentives to optimize operations and returns.
At illumina CPA Group, we help businesses navigate the complexities of tax with clarity and confidence. Our tailored services strengthen the connection between tax planning, advisory, and reporting—ensuring your strategy is both proactive and aligned.
The world is complex. So is tax. Don’t go it alone.
For more information, contact us.
Disclaimer
The contents of this insight are intended for general information only. illumina CPA Group, Inc. is not, by means of this communication, rendering professional advice or services. Before making any decisions or taking any action that may affect your finances or your business, you should consult a qualified professional adviser.
Copyright © 2025. illumina CPA Group, Inc. All rights reserved.