Key Provisions of “The One, Big, Beautiful Bill Act”

Home » Insights » Key Provisions of “The One, Big, Beautiful Bill Act”

By Christopher Migliaccio, JD, Partner, Elisha M. Brestovansky, CPA, MBA, Director and Thomas Kinder, JD, Director

On July 4, 2025, “The One, Big, Beautiful Bill Act” (OBBBA) was signed by the President and became law. OBBBA has a wide range of tax provisions – some simply extending current law that was set to expire, others enacting significant changes compared to the prior tax code. A comparison between the law prior to OBBBA enactment vs. new law is shown below for key provisions. Feature articles on specific provisions and impacts to industries will follow in the coming weeks.

Key Provisions

Provision	Prior Law	New Law	PKFOD Observations
Tax Rates	Tax rates scheduled to end after 2025. For individuals tax rates are 10%, 12%, 22%, 24%, 32%, 35% and 37%. For trusts and estates, the rates are 10%, 24%, 35% and 37%. The corporate tax rate is 21%.	Extension of tax rates – The current income tax rates would continue for individuals, estates and trusts and be indexed for inflation. No change to the corporate tax rate.	Taxpayers will avoid the potential tax increases that would have occurred with the prior law expirations.
Qualified Business Income (QBI) Deduction for Pass-Throughs	Qualified Business Income Deduction (IRC Section 199A) of 20% ending after 2025.	Qualified Business Income Deduction (IRC Section 199A) of 20% is permanent AND increases the deduction limit phase-in range to $75,000 ($150,000 for joint filers). In addition, the minimum QBI deduction is $400 if total active qualified trade or business income is at least $1,000. The minimum deduction and minimum business income thresholds are indexed annually for inflation. Effective for tax years beginning after December 31, 2025.	More taxpayers will benefit from the QBI deduction because of the increased limits on phase-in ranges.
State and Local Tax (SALT) Deduction Cap	SALT deduction capped at $5,000 ($10,000 married filing joint).	SALT deduction increases to $40,000 for 2025, $40,400 in 2026 and by an additional 1% annually in 2027-2029. SALT deduction is phased out for taxpayers with modified adjusted gross income (MAGI) greater than $500,000 in 2025. The phaseout threshold increases to $505,000 in 2026 and by 1% annually thereafter. For higher income taxpayers the cap is reduced by 30% of the excess MAGI over the threshold amount with a minimum deduction of $10,000. The changes are effective for tax years 2025-2029 with the SALT cap reverting to $10,000 in 2030.	Benefits taxpayers located in high-tax states and allows them to deduct more of their state and local taxes. However, some taxpayers may find they do not benefit because of the new phase outs at higher income levels.
Estate Tax Exemption	Estate and gift exemptions are $13.99 million per individual for decedents dying and gifts made in 2025.	Extension of increased estate and gift tax exemptions and permanent enhancement – gift and estate tax basic exclusion would be $15 million beginning in 2026 and would be indexed for inflation.	Increased exemptions allow individuals to transfer more wealth tax-free which reduces potential federal estate tax liabilities. The permanence of the increase avoids the potential for future cliffs, a concern under prior law. Higher exemptions also provide a greater ability for charitable gifting.
Bonus Depreciation	Bonus depreciation rate for 2025 is 40%, 2026 is 20% and full phase-out to 0% in 2027.	Permanently extends and modifies bonus depreciation to 100% for property placed in service on or after January 19, 2025. There is a limited transitional election available to apply pre-law phase down rates instead of 100%.	Businesses can fully expense bonus depreciation eligible assets, creating an incentive for investment. For 2025, the placed-in-service date will be of great importance and a point of contention with the IRS, given the different expensing rules for property placed in service right before January 19. 2025.
Research & Development (R&D) Expensing (IRC Sec. 174)	Businesses are required to capitalize and amortize R&D expenditures over 5 years for domestic R&D expenses and 15 years for foreign R&D expenses.	Restoration of full expensing for research and development costs. Full expensing will be treated as a change in accounting method. Taxpayers would still have the option to amortize domestic R&D expenses over a period of at least 5 years. The treatment of foreign R&D expenses is unchanged. Taxpayers will be permitted to elect to accelerate the remaining deductions for prior capitalized R&D expenses over a one-year period or a two-year period. In addition, small taxpayers can apply the deduction retroactively to tax years beginning after December 31, 2021. Small taxpayers are taxpayers that have average annual gross receipts of $31 million or less over the three tax years prior to the first tax year beginning after December 31, 2024.	Businesses can immediately deduct domestic R&D expenses- improving cash flow. There are several planning points around small taxpayers with elections to accelerate past deductions over one or two years, versus going back to amend prior year returns.
Business Interest Deduction (IRC Sec. 163(j))	Business interest deduction computation under IRC Sec. 163(j) was calculated using an EBIT approach- excluding depreciation and amortization deductions.	Restoration of business interest deduction computation under IRC Sec. 163(j) to include an add-back for depreciation and amortization expense (EBITDA approach). Effective for tax years beginning after December 31, 2024 and before January 1, 2030.	Businesses will benefit from the larger computation base and be able to deduct more interest expense.

Other Key Items to Watch for Businesses (in general)

Provision	Prior Law	New Law	PKFOD Observations
IRC Sec. 179 Depreciation	IRC Section 179 expense limit is $1 million for 2025. The Section 179 expense is reduced dollar for dollar when total qualifying property placed in service exceeds $2.5 million.	Increase of IRC Section 179 expense limit to $2.5 million beginning in 2025 and indexed for inflation annually. The Section 179 expense is reduced dollar for dollar when total qualifying property placed in service exceeds $4 million.	The increased deduction limit and qualifying property threshold allow businesses to deduct a larger portion of their capital investments – thus reducing their taxable income.
Paid Family Leave Tax Credit	Businesses receive a tax credit for providing family and medical leave to their employees. The credit is a minimum percentage of 12.5% of the amount of wages paid to a qualifying employee while on family and medical leave for up to 12 weeks per year. The credit is increased by 0.25% for each percentage point in which the amount paid to the employee exceeds 50% of the employee’s wages, up to a maximum of 25%.	The Paid Family Leave tax credit has been made permanent. In addition, employers may now claim a credit for a portion of the premiums paid toward paid family leave insurance policies. Lastly, part-time employees are now eligible along with employees that completed at least six months of service.	Employers have multiple ways to provide leave – such as through direct wage payments or through insurance premiums and businesses can support a more diverse employee base with the inclusion of both part-time employees and newly hired employees with at least six months of service.
Employer-provided Childcare Credits	Employers could claim a non-refundable tax credit of 25% of qualified child-care expenditures with an annual credit cap of $150,000.	Enhancement of employer -provided childcare credits – increase of credit from 25% to 40% to a maximum credit of $500,000 and 50% for small businesses up to a maximum of $600,000 beginning in tax years after December 31, 2025. There are also provisions for jointly owned or operated child-care facilities.	Substantial tax relief for employers that invest in childcare services for their employees. In addition, small employers can combine resources to provide childcare services together – thus making it more feasible for small employers to take advantage of the credits.
Form 1099 Reporting	Form 1099 reporting threshold is $600.	Increase in Form 1099 reporting threshold from $600 to $2,000 and annual increases indexed for inflation.	Reduced reporting requirements for businesses.
Tip Credit	Tax credit on tips is available to employers in the food and beverage industry for employer-paid Social Security and Medicare taxes on employee tips. The credit calculation uses a fixed minimum wage of $5.15/hour as a baseline.	Tax credit on tips has been extended to services to a customer or client in the barbering and hair care, nail care, esthetics and body and spa treatment service industries effective for taxable years beginning after December 31, 2024. The credit calculation for the beauty service industries will use the federal minimum wage in effect during the month the tips are received as a baseline.	More service-oriented businesses where tipping is the norm will experience tax relief. There may be opportunities to adjust tip policies and compensation structures to maximize credit eligibility.

Provisions for Specific Industries

Provision	Prior Law	New Law	PKFOD Observations
Opportunity Zones (OZ)	Investment in OZs, or low-income communities that provides investors with tax incentives for investing in Qualified Opportunity Zone Funds (QOFs). Investors were able to defer 10% of the gain if the QOF is held for 5 years and an additional 5% if held for 7 years. The 7 year benefit period expired in 2019 and is no longer attainable. If investors hold the QOF for 10 years, they can elect to exclude 100% of the gain on the appreciation of the QOF investment itself.	Permanent Opportunity Zone (OZ) policy that builds off of current policy and creation of rolling ten-year OZ designations beginning January 1, 2027. Also preserves current OZ benefits and provides additional benefits such as the exclusion of 30% in capital gains for investments in rural OZs after a 5 year holding period and the option to defer up to $10,000 of ordinary income by investing in Qualified Opportunity Funds (QOFs).	Greater opportunities for tax advantaged investments while benefiting rural areas through increased investment and economic development.
Energy Tax Credits	Energy tax credits expiring in 2032.	The Commercial Clean Vehicle credit ends September 30, 2025 and, generally speaking, most other energy credits have expedited sunset periods.	Businesses will need to evaluate the impact of the elimination of energy credits on their business models and clean energy project developers will need to expedite project timelines to meet the new deadlines to qualify for available credits.
Employee Retention Credits	The Employee Retention Credit claims were paused on September 14, 2023 and on August 8, 2024, the IRS announced that it had processed ERC claims filed between September 14, 2023 and January 31, 2024. Employer had a 3 year statute of limitations for claims.	Updates to the Employee Retention Credits (ERC) under IRC Sec. 3134- which applies to ERC claims for Q3 and Q4 of 2021. OBBBA retroactively prevents the IRS from processing or paying ERC claims for these quarters if those claims were filed after January 31, 2024. This does not appear to apply to claims filed for other quarters, however. Adds an extension of time for the IRS to challenge a claim to six years from the latest of the date the original return was filed, the date the return was treated as filed, or the date a claim or refund was made, for claims related to Q3 and Q4 of 2021. Requires ERC promoters to comply with due diligence requirements to taxpayer eligibility and applies a $1,000 penalty for each failure to comply. Also extends the penalty for excessive refund claims to employment tax refund claims.	Businesses should assess the status of any ERC claims filed after January 31, 2024 and consult with tax professionals. In addition, businesses should ensure all necessary documentation supporting ERC claims are detailed and readily accessible with the increase in the statute of limitations.

International Tax

Provision	Prior Law	Provisions – As Passed	PKF Observations
Section 951A	Section 951A global intangible low-taxed income (“GILTI”) allowed for a reduction of a Controlled Foreign Corporation’s (“CFC”) net tested income by 10% of the CFC’s Qualified Business Asset Investment (i.e., investment in tangible assets).	GILTI is amended by removing the benefit of the Qualified Business Asset Investment and replacing the reference to GILTI with Net CFC Tested Income throughout the code.	The removal of the benefit for Qualified Business Asset Investment negatively impacts clients that have material investments in tangible assets outside of the US (i.e., Hotel/Hospitality, Factories, etc.).
Section 250 Deduction	The Section 250 deduction was 37.5% for Foreign Derived Intangible Income (“FDII”) and 50% for GILTI. These deductions were scheduled to be reduced to 21.875% for FDII and 37.5% for GILTI for taxable years beginning after December 31, 2025. The effective tax rate on GILTI was 10.5% to 13.125% for tax years beginning before January 1, 2026 and was scheduled to increase to 13.125% to 16.406%. The effective tax rate on FDII was 13.125% for tax years beginning before January 1, 2026 and was scheduled to increase to 16.406%.	Reduces the current Section 250 deduction to 33.34% for FDII and from to 40% for GILTI (now referred to as Net CFC Tested Income). These rates are intended to remain in place indefinitely. Additionally, similar to GILTI, references to FDII are replaced with Foreign-Derived Deduction Eligible Income throughout the code. The effective rate on Net CFC Tested Income increases to 12.6% – 14%. The Foreign-Derived Deduction Eligible Income effective tax rate is 14%.	The Section 250 deductions were scheduled to decrease and the new law is a middle ground from the expected reduction. This is a win for taxpayers who have Net CFC Tested Income.
BEAT	Base Erosion Anti-Abuse Tax is a tax which is designed to prevent multinational corporations from reducing their U.S. tax liability by shifting profits outside the U.S. through payments made to related parties (usually in lower tax jurisdictions). This tax only applies to large corporations with an average annual gross receipts of $500M.	Modifies the BEAT by increasing the BEAT tax base to 10.5%. Additionally, there are minor modifications to some of the other references in Section 59A.	The BEAT tax base was scheduled to increase to 12.5% starting in tax years beginning after December 31, 2025 and the more moderate increase is a win for the corporations to which it applies.
CFC Look-Thru	Section 954(c)(6) precludes dividends, interest, rents and royalties from the definition of foreign personal holding company income to the extent it is from a related party CFC (“CFC Look-Thru”) provided it meets certain factors. Under 954(c)(6)(C) the CFC Look-Thru applied to tax years of Foreign Corporations beginning after December 31, 2005 and before January 1, 2026. These CFC Look-Thru rules have been extended multiple times.	Section 954(c)(6)(C) is amended to permanently extend the CFC Look-Thru rules.	It was expected that the CFC Look-Thru would be extended, as there has been a history of extension for this provision. A permanent extension allows businesses relying on the CFC Look-Thru to more effectively plan for the future without concerns about the provision sunsetting.

Other Key Items to Watch for Individuals

Provision	Prior Law	New Law	PKFOD Observations
No Tax on Tips	Tips were treated as taxable income and subject to federal income taxes.	No tax on tipped income capped at $25,000 for qualified tips. This is structured as a deduction which taxpayers can take even if they do not elect to itemize deductions. The deduction phases out by reducing the $25,000 cap by $100 for every $1,000 over $150,000 ($300,000 joint filers). This provision is set to expire for taxable years beginning after December 31, 2028.	There are some slight hoops to jump through, but this should ultimately result in a reduced tax burden on employees in the service industry. Employers need to be aware of the reporting requirements as regulations and guidance are released.
Tax on Overtime	Overtime was treated as taxable income subject to federal income taxes.	No tax on overtime wages capped at $12,500 ($25,000 joint filers) and phases out when modified adjusted gross income exceeds $150,000 ($300,000 joint filers) in a similar calculation as above. Like the no tax on tips provision, this is structured as a deduction which taxpayers can take even if they do not elect to itemize deductions. Additionally, this provision is set to expire for taxable years beginning after December 31, 2028.	Similar as above, there are some hoops to jump through, but this should ultimately result in a reduced tax burden on middle class employees.
Section 1202- Qualified Small Business Stock (QSBS) Gain Exclusion	Minimum holding period of 5 years for 100% gain exclusion, gross asset limit of $50 million and gain exclusion cap of the greater of $10 million or 10 times the adjusted basis in the stock.	Higher gain exclusion cap of $15 million, a tiered phase-in of gain exclusion for holding periods of less than 5 years (with benefits starting at 3 years) and a higher gross asset limit of $75 million. The exclusion cap and gross asset limit are indexed for inflation annually. These enhancements apply to QSBS acquired after the date of enactment. QSBS acquired on or before this date are subject to previous rules.	Provides for greater flexibility in exit strategies and allows for investors to invest more funds with qualifying small business while getting a substantial exclusion on gains.
Child Tax Credit	The special tax rules for child tax credit allowed for a $2,000 credit for tax years beginning after December 31, 2017 and before January 1, 2026.	Permanently incorporates the special rules and increases child tax credit to $2,200 per child.	This provision permanently increases the child tax credit which will leave families one less thing to worry about around tax season.
Standard Deduction	Special rules were introduced to increase the standard deduction for tax years beginning after December 31, 2017 and before January 1, 2026, from $4,400 for head of household to $18,000 and from $3,000 for everything else to $12,000 ($24,000 joint filers).	The special increase to the standard deduction was made permanent and increasing the $18,000 to $23,625 and the $12,000 to $15,750 ($31,500 joint filers). This increase applies to tax years beginning after December 31, 2024.	This provision along with maintaining the individual tax rates passed with the TCJA will keep taxpayers at roughly the same post-tax income they were at following the enactment of TCJA.
Tax on Car Loan Interest	Under prior law, car loan interest was considered personal interest and deductions were not allowable.	A deduction is allowed for up to $10,000 for auto loans on qualified passenger vehicles. The deduction is available for tax years beginning after December 31, 2024 through tax years beginning before January 1, 2029.	This provides an additional benefit to the high percentage of taxpayers who are financing vehicle purchasers.
AMT	Special rules were introduced to increase the Alternative Minimum Tax exemptions and phase-out thresholds for tax years beginning after December 31, 2017 and before January 1, 2026.	Made the special rules related to the AMT exemption and phase-out thresholds permanent.	These rules were introduced with the TCJA and are made permanent under the latest tax legislation.
Deductions for residential interest and casualty losses	Special rules were introduced for tax years beginning after December 31, 2017 and before January 1, 2026, to limit the deductions for qualified residential interest and casualty loss deductions.	Permanent extension of limitation on deduction for qualified residential interest and casualty loss deductions.
Miscellaneous Itemized Deductions	Miscellaneous itemized deductions were disallowed for tax years beginning after December 31, 2017 and before January 1, 2026.	Permanent extension of the disallowed miscellaneous itemized deductions; however, adds unreimbursed employee expenses for eligible educators are allowable deductions.
Limitation on Itemized Deductions	When individuals adjusted gross income exceeds the applicable amount in Section 68, a limitation is applied to their itemized deductions. These limitations were put in place for tax years beginning after December 31, 2017 and before January 1, 2026.	Permanently limits the itemized deductions on high income earners with a slightly different calculation than the current Section 68.
Scholarship Credits	No previous law	Tax credits for individual contributions to scholarship granting organizations – up to $1,700.	The benefit here is small, but is a step towards encouraging investment in individuals who wish to seek higher/better education.
Floor on charitable contribution deductions	60% adjusted gross income (AGI) limitation for cash gifts. No minimum limitation or floor for charitable gifts.	Effective for tax years beginning after December 31, 2025, adds a 0.5% floor on charitable contributions for taxpayers who elect to itemize their deductions for taxable years after December 31, 2025. Only the portion of charitable contributions exceeding 0.5% of an itemized taxpayer’s AGI would be deductible. Also permanently extends the 60% AGI limitation on cash gifts.	Reduces the tax benefit of charitable giving for taxpayers who itemize their deductions.
IRC Sec. 529 Plan Updates	For K-12 expenses only tuition up to $10,000 per year were eligible for distributions from 529 plans. For college expenses, tuition, fees, room & board, books and equipment were eligible expenses.	Additional elementary, secondary and home school expenses treated as eligible education expenses and creation of a federal program, “Trump Accounts” that are similar to 529 state plans.	Additional expenses are eligible expenses for 529 plan distributions; however, it will be imperative to check state rules for eligible distribution expenses as they may differ from Federal rules.
Clean Vehicle Credit	Taxpayers were allowed a credit determined under Section 30D for qualifying “clean vehicles”, which was set to expire for vehicles placed in service after December 31, 2032.	Termination of clean vehicle tax credit effective for vehicles acquired after September 30, 2025. Other clean energy credits are also terminated mostly for expenditures made after December 31, 2025.	The removal of these provisions will reduce the benefit of buying clean energy products in the future. Taxpayers will need to reach out to dealerships to see if it is possible to expedite their clean vehicle delivery.

There are also changes for not-for profits discussed here and private foundations discussed here.

There are also several provisions that were included in earlier versions of both the House and Senate bills that did not make the final cut:

Increased gross receipts threshold to $80 million (from $25 million) for small manufacturers for simpler accounting methods.
The House version of the tax bill included a provision for an increase to 23% for the IRC Sec. 199A QBI deduction but the increase did not make it to the final bill.
The Senate reconciliation version of the tax bill included limitations on Pass-Through Entity Taxes (PTET) in conjunction with the SALT cap but this did not make the final bill. The previous version only allowed individuals to deduct unused portions of their SALT cap plus the greater of $40,000 of their allocation of their PTET or 50% of their allocation of PTET.
Additionally, as discussed in our previous article, the Treasury Department announced a deal with G-7 allies which would exclude U.S. companies from some taxes imposed by other countries (i.e., Pillar 2 and Digital Service Taxes), in exchange for removing the new Section 899, what some were calling the “revenge tax” from The One, Big, Beautiful Bill. Section 899 was introduced to impose a tax on foreign-owned U.S. corporations, if the owner was in a country which imposed “unfair” taxes on U.S. businesses. The addition of Section 899 had many people worried about future foreign investment into U.S. businesses.
Proposed taxes on wind, solar and litigation funding were excluded.
Additional tax on litigation funding companies was excluded.

The above listing of changes is only a sampling of all of the tax law changes. Stay tuned for additional articles that dive deeper into the changes in the tax provisions.