The Big Beautiful Bill: What It Means for Business

The most significant pieces of legislation are often those that generate the most debate. So it was with the One Big Beautiful Bill Act (OBBBA) — the massive tax and spending bill that President Trump signed into law in July.

With Democrats united against the bill, its supporters could only hope to pass it through budget reconciliation, a special process allowing certain tax, spending, and debt-limit legislation to pass the Senate with a simple majority, rather than the usual 60 votes. Even then, the bill needed a tie-breaking Senate vote from the vice president, alongside support from nearly every Republican in the House, to reach the president’s desk.

Now on the books, the OBBBA ranks among the largest tax reforms enacted in the 21st century, promising major impacts across a wide range of industries.

Favorable for Business

What are the key provisions for business? As our tax attorneys explain, the new law makes permanent many of the taxpayer-favorable provisions of the Tax Cuts and Jobs Act (TCJA) — the sweeping tax overhaul enacted in 2017 — and expands numerous other favorable business tax provisions.

Among other important changes, the OBBBA permanently:

• Extends the qualified business income deduction under Section 199A, bringing certainty to the income tax rates applicable to flow-through business income and investments in publicly traded securities issued by master limited partnerships and real estate investment trusts.

• Allows businesses to elect 100 percent bonus depreciation under Section 168(k) for certain machinery, equipment, and other qualified property acquired and placed in service after January 19, 2025. This provision should give taxpayers additional flexibility and certainty in determining the expected after-tax cost of their capital expenditures.

• Restores taxpayers’ ability to immediately expense certain domestic research and experimental expenditures paid or incurred in tax years beginning after December 31, 2024. This provision should prove especially beneficial to taxpayers in research-heavy businesses and industries.

The OBBBA also adjusts the corporate alternative minimum tax for oil and gas companies, expands the scope of activities that generate qualifying income for master limited partnerships, restores and makes permanent the more favorable interest deduction limitations that were in effect prior to 2022, and expands benefits for qualified small business stock.

On the international side, the new law modifies the tax rates and taxable income computations applicable to global intangible low-taxed income (GILTI) and foreign derived intangible income (FDII), and permanently sets the base erosion and anti-abuse minimum tax (the BEAT) to 10.5 percent. Each of those changes will affect the effective tax rates applicable to multinational corporations.

Read more in our Tax team’s in-depth analysis.

A Net Negative for Clean and Renewable Energy

When the Inflation Reduction Act (IRA) passed in August 2022, it heralded a new era for the clean and renewable energy industries. Three years on, the OBBBA has put this new era in jeopardy, substantially altering many of the tax benefits and incentives that the IRA expanded or introduced.

Wind and solar were hit the hardest: Facilities placed in service after 2027 will no longer be eligible for technology-neutral tax credits (Sections 45Y and 48E), unless they begin construction before July 4, 2026. Other technologies will see those credits begin to phase down earlier (after 2033).

Yet some industries will be pleased. For example, the Section 45Z clean fuel production tax credit has been extended by two years (through the end of 2029), a boon for renewable natural gas. Meanwhile, the Section 45Q carbon capture and sequestration credit rates for commercial utilization — and for use as a tertiary injectant in enhanced oil and gas recovery — has increased.

Perhaps the most impactful changes are the “prohibited foreign entity” limitations, which will impose a significant risk, compliance, and diligence burden on taxpayers. The clean energy industry will need to work together to quickly develop strategies for sharing information and documenting compliance.

Our Renewable Energy Tax team takes a closer look at the new law’s changes and implications for taxpayers.

Welcome Developments for the Real Estate Sector

During the OBBBA’s winding journey from committee bill to federal statute, many REITs and real estate investors watched and waited on the edge of their seats. After numerous important changes from the initial Senate draft, most in the industry will be happy with where the new law landed.

Unlike the initial Senate draft, the final OBBBA:

• Omits retaliatory tax increases on individuals and entities from, and governments of, certain countries deemed to impose discriminatory taxes on U.S. persons or their controlled foreign corporations.

• Preserves a tax exemption for governments of those countries, avoiding significant new tax liabilities on sovereign wealth investors from these jurisdictions.

• Makes permanent the 20 percent deduction on “qualified REIT dividends” that had been set to sunset at the end of 2025.

• Increases the limit on the value of taxable REIT subsidiary securities a REIT may hold.

Alongside the OBBBA’s extensions of other beneficial deductions, these changes should support continued investment and operational efficiency in the real estate sector. REITs and real estate investors would be wise to consult with tax advisors on the evolving tax landscape and the impact of the OBBBA on their businesses and investments.

Read more from our Tax team’s deeper analysis.

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