Key Provisions for Businesses of One Big Beautiful Bill Act

The One Big Beautiful Bill was passed into law on July 4. As with most tax legislation, this bill has an impact on both businesses and individuals. Here are some of the key provisions that will affect businesses. In our next newsletter, we’ll cover the provisions that affect individuals.

Qualified Business Income (QBI) deduction. Deduction remains at 20% and made permanent. Phase-out amounts are increased (expands the deduction limit phase-in range by increasing the $100,000 (MFJ) and $50,000 (single filers) amounts to $150,000 and $75,000, respectively), and a new minimum $400 deduction is added for taxpayers with at least $1,000 of QBI.

Pass-through entity tax (PTET) SALT deduction. Individual SALT deduction is $40,000 for most filers.  Additionally, there would be no SALT limitation for pass-through entities.

Excess business loss (EBL) limitation. Makes the Sec. 461(l) EBL limitation permanent, and retains the existing treatment of EBL carryforwards.

Employee retention credit (ERC). The bill prohibits the payment of Q3 2021 and Q4 2021 claims as of Jan. 31, 2024, and increases enforcement mechanisms for bad actors.

Employer-Provided Childcare Credit. Increases to 40% (50% for small businesses); max credit $500,000 ($600,000 for small businesses); inflation adjusted.

Form 1099 information reporting. The bill would increase the information reporting threshold for certain payments to persons engaged in a trade or business and payments of remuneration for services to $2,000 in a calendar year (from $600), with the threshold amount to be indexed annually for inflation in calendar years after 2026.

Repeal revision to de minimis rules for third-party network transactions. Reinstates the pre-ARPA 2021 threshold as if the lowered one was never enacted. Note:  The IRS continued to apply the higher pre-ARPA threshold through 2023 but for 2024, applied a threshold of over $5,000 of payments for goods and services (rather than $600), and $2,500 for 2025 and planned to use $600 for 2026 and later (IR-2024-299).

Paid Family and Medical Leave Credit. Extends and enhances credit; allows for insurance premiums; modifies aggregation and eligibility rules.

Research and experimental (R&E) expensing. Allows full expenses for domestic R&E from Jan. 1, 2025. Foreign R&E remains at 15-year amortization. In addition, the bill would provide small businesses with the option to apply this change retroactively back to 2022 through amended returns.  It would also allow taxpayers to accelerate any remaining Sec. 174 deductions.

Bonus depreciation. Permanently extends and modifies the additional first-year depreciation deduction. Allowance increased to 100% of property acquired and placed in service on or after Jan. 19, 2025.

Enhanced Small Business Expensing. Increases the maximum amount a taxpayer may expense under Sec. 179 to $2,500,000 and increases the phaseout threshold amount to $4,000,000.

Energy-efficient commercial buildings deduction. Terminates deduction for property that begins construction after June 30, 2026.

Clean Electricity Investment Credit. Termination for wind and solar facilities PIS after 2027 and all other facilities after 2032. New foreign entity restrictions.

Wondering how the new tax legislation affects your business?

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