OBBBA Ushers in Major Business and International Tax Reform: What You Need to Know

Imagine slashing your business’s tax bill by millions with a single equipment purchase. On July 4, 2025, President Trump signed the One Big Beautiful Bill Act (OBBBA), a 940-page tax overhaul that makes this possible. The most significant reform since the 2017 Tax Cuts and Jobs Act (TCJA), OBBBA delivers powerful incentives for businesses to invest, innovate, and compete globally. Here’s what you need to know to navigate this new tax landscape.

A New Era for Business Investment

OBBBA’s core message is clear: invest in growth, and the tax code will reward you. The bill reinstates 100% bonus depreciation for qualified assets purchased after January 19, 2024, letting businesses fully expense capital investments in the year of purchase. For a small manufacturer, this could mean writing off millions in machinery upgrades, freeing up cash for hiring or expansion.

Small and medium-sized enterprises also benefit from an expanded Section 179 deduction. Businesses can now immediately expense up to $2.5 million in new equipment annually, with the phase-out threshold starting at $4 million. This empowers companies to scale without deferring tax benefits over years.

Research and development (R&D) gets a major boost too. Domestic R&D costs are once again fully deductible in the year incurred, reversing a 2017 rule requiring five-year amortization. Small businesses with average gross receipts under $31 million can retroactively deduct R&D expenses from 2022 to 2024, while larger firms can claim remaining balances in 2025 or spread them over two years. This is a game-changer for tech startups and manufacturers driving innovation.

The bill also locks in two permanent provisions:

• The 20% Qualified Business Income (QBI) deduction (Section 199A) for pass-through entities, offering stability for small business owners.

• The limitation on excess business losses (Section 461), allowing disallowed losses to be carried forward as net operating losses—crucial for volatile sectors like real estate or startups.

Reshaping Global Tax Strategy

For multinationals, OBBBA refines international tax rules to align with global standards. The Global Intangible Low-Taxed Income (GILTI), now called Net CFC Tested Income (NCTI), and Foreign-Derived Intangible Income (FDII), now Foreign-Derived Deduction Eligible Income (FDDEI), see a slight deduction reduction, raising the tax rate on foreign earnings from 13.125% to 14%. This modest shift supports OECD global minimum tax efforts, impacting how U.S. firms plan overseas profits.

U.S. exporters get a break: 50% of sales through foreign branches for goods used abroad now qualify as foreign-sourced income, enhancing Foreign Tax Credit benefits and reducing double taxation. The Controlled Foreign Corporation (CFC) look-through rule is now permanent, offering long-term clarity for multinational tax planning. Additionally, the Base Erosion and Anti-Abuse Tax (BEAT) stays at 10.5%, avoiding a planned 2026 increase to 12.5%.

Key Takeaways for Businesses

• Maximize Investments: Use 100% bonus depreciation and expanded Section 179 to write off equipment purchases.

• Leverage R&D Deductions: Claim immediate or retroactive R&D deductions to fuel innovation.

• Plan Globally: Review international structures to optimize NCTI, FDDEI, and CFC benefits.

• Act Now: Consult IC Americas to align strategies with OBBBA’s opportunities and compliance requirements.

OBBBA transforms how businesses invest and compete, offering immediate deductions, permanent relief for pass-throughs, and streamlined international rules. With changes already in effect, businesses should act swiftly to capitalize on these incentives. Consult a tax advisor to ensure your strategy aligns with this landmark reform.