Jul 4, 2025
The One Big Beautiful Bill Act (H.R. 1) 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!
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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.
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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.
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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 |
Bonus Depreciation (Sec. 168) | 100% expensing for property placed in service or plants planted on/after Jan. 19, 2025 | Permanent |
Sec. 179 Expensing | Cap raised to $2.5M; phaseout begins at $4M | Indexed for inflation |
R&D Expenses (Sec. 174) | Immediate deduction for domestic R&E; foreign R&E amortized over 15 years | After Dec. 31, 2024 |
Retroactive R&D Relief | Small businesses (≤$31M receipts) may apply retroactively to post-2021 years | Optional acceleration allowed |
Business Interest Limitation (Sec. 163(j)) | Returns to EBITDA-based limit; excludes Subpart F, GILTI, Sec. 78 gross-up | After Dec. 31, 2024 |
Paid Leave Credit (Sec. 45S) | Made permanent | Permanent |
Depreciation for Production Property | 100% deduction for “qualified production property” used in manufacturing | Permanent |
Advanced Manufacturing Credit | Credit rate increased to 35% for property placed in service after Dec. 31, 2025 | Jan. 1, 2026 |
Spaceports (Sec. 142) | Eligible for exempt facility bonds | New classification |
Child Care Credit (Sec. 45F) | Credit rate increased to 40%; max credit raised to $500K ($600K for small businesses) | Indexed for inflation |
Opportunity Zones (Sec. 70421) | Made permanent; definition of “low-income community” narrowed | Jan. 1, 2027 |
New Markets Credit (Sec. 45D) | Made permanent | Permanent |
Residential Construction Contracts | Exception from percentage-of-completion method for certain residential projects | Applies to new contracts post-enactment |
QSBS Exclusion (Sec. 1202) | Exclusion raised to 75% (≥4 years); 100% (≥5 years) | For stock acquired after enactment |
Excess Business Losses (Sec. 461(l)) | Limit made permanent; NOL treatment preserved | Permanent |
International Tax Provisions
Provision | Summary | Effective Date / Notes |
GILTI (Sec. 951A) | Rebranded as “net CFC tested income”; QBAI and DTIR removed | After Dec. 31, 2025 |
GILTI Deduction (Sec. 250) | Increased to 40%; effective rate ~14% | Permanent |
FDII (Sec. 250) | Rebranded as “foreign-derived deduction eligible income”; QBAI removed | Permanent |
Foreign Tax Credit (Sec. 960(d)) | Deemed paid credit increased from 80% to 90% | After Dec. 31, 2025 |
Expense Allocation | Interest and R&E not allocated to net CFC tested income | Simplifies FTC limitation |
CFC Look-Through Rule (Sec. 954(c)(6)) | Made permanent | Permanent |
BEAT (Sec. 59A) | Rate set at 10.5%; credit disallowance removed | Permanent |
Sec. 899 “Revenge Tax” | Dropped from final bill | Removed after G7 negotiations |
Interest Capitalization | Capitalized interest treated as subject to Sec. 163(j) | Tightens deductibility |
Sec. 174 Foreign R&E | Still amortized over 15 years | No change from 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; reverts to $10K in 2030 | Phase-down begins at $500K MAGI |
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 |
QSBS (Sec. 1202) | See business table for holding period-based exclusions | Applies to post-enactment acquisitions |
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 |
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.
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