May 2025 – The U.S. House has passed the One Big Beautiful Bill Act, a sweeping reconciliation bill that seeks to make the Trump-era Tax Cuts and Jobs Act (TCJA) provisions permanent, enhance key business incentives like R&D credits and bonus depreciation, and overhaul green energy incentives and IRS procedures.
With nearly 400 pages of tax legislation, the bill touches nearly every corner of the tax code. For CPAs and tax advisors, it presents both urgency and opportunity.
The bill now heads to the Senate, where passage is expected under reconciliation rules, but with possible amendments. GOP leadership has set a target of July 4, 2025, to finalize passage — largely driven by a pending mid-July debt ceiling deadline, which this bill also addresses
Focus Areas for CPAs: R&D Expensing, Bonus Depreciation, and Clean Electricity Investment Tax Credit
Research & Experimental (R&E) Expensing – Section 174: Full Expensing Restored
Background: What Was the Law Before OBBBA?
Under the Tax Cuts and Jobs Act (TCJA), starting in 2022, businesses could no longer immediately deduct domestic research and experimental (R&E) expenses. Instead, they were required to amortize such expenses over 5 years (15 years for foreign R&D). This change affected cash flow and created significant book-tax timing differences, especially for small to mid-size companies.
- Affected costs: Software development, engineering, testing, and pilot models
- Issues: Complexity in accounting, increased tax liability, disincentivizing R&D investment
Proposed Changes Under OBBBA
The One Big Beautiful Bill Act repeals the mandatory amortization and reinstates immediate expensing of R&E expenditures for a limited window.
1. Domestic R&E Expensing Restored
- Effective for expenses incurred after 2024
- Applies through 2029
- Taxpayers may elect to amortize expenses, but are no longer required to
2. Foreign R&D Still Requires Amortization
- No changes to the 15-year amortization rule for foreign-incurred research
- Multinationals must still bifurcate tracking and treatment of domestic vs. foreign R&D
3. Section 280C Election Rules Unchanged
- Taxpayers may still reduce their credit under §41 by the tax-effected amount of the deduction (or reduce their deduction by the credit)
- Coordination between §41 and §174 continues to be critical for compliance and planning
Implications for CPAs and Tax Professionals
- Cash Flow Gains: Immediate deductions reduce taxable income, improving cash flow for startups, biotech, and SaaS firms
- Retroactive Planning: While not retroactive to 2022–2024, forward-looking studies can now incorporate full expensing
- Election Analysis: Evaluate whether amortizing (rather than deducting) provides better outcomes in years with NOLs or credit limitations
- Credit Integration: Ensure synchronization between §41 credit claims and §174 treatment to avoid exam risk
- Software Development: A major win for companies investing in internal-use software or cloud-based platform tools
CPA Action Plan
- Reassess all open §174 positions for 2025–2029
- Model elective amortization vs. deduction scenarios
- Inform clients of improved ROI for R&D investment
- Anticipate required Form 3115 disclosures or method changes
Bonus Depreciation – Section 168(k): 100% Expensing Reinstated
Background: What Was the Law Before OBBBA?
Bonus depreciation was temporarily increased to 100% under the TCJA, but began phasing down after 2022:
- 2023: 80%
- 2024: 60%
- 2025: 40% (projected)
- 2026: 20%
- 2027+: 0%
This created planning challenges for real estate developers, manufacturers, and energy firms—especially when bonus depreciation drove a significant portion of early-year deductions from cost segregation studies.
Proposed Changes Under OBBBA
The bill fully restores 100% bonus depreciation for qualifying property acquired after January 19, 2025, and placed in service by the end of 2029.
1. 100% Bonus Depreciation Window
- Applies to MACRS property with a recovery period of 20 years or less
- Applies to new and used property (as long as not previously used by the taxpayer)
- Includes qualified improvement property (QIP) if placed in service after enactment
2. New Category for Agricultural & Chemical Production
- Special provision for “qualified production property” used in agriculture or chemical manufacturing
- Intended to incentivize domestic manufacturing resilience
3. No Explicit Recapture Changes
- No revisions proposed to existing §1245 or §1250 recapture rules
- Existing depreciation recapture mechanics remain in effect on sale
Implications for CPAs and Tax Professionals
- Cost Segregation ROI Improved: Bonus depreciation fully restored for personal property identified in cost seg studies
- Construction Planning: Taxpayers can structure purchases or placed-in-service timing to optimize bonus eligibility
- M&A Structuring: Asset deals more attractive when buyer can step up and bonus-depreciate key assets
- Agribusiness Clients: First-time targeted depreciation benefit for this sector—should evaluate eligibility for “qualified production property”
CPA Action Plan
- Encourage clients to acquire and place in service assets after Jan 19, 2025
- Reprice and reproject cost segregation models to reflect full expensing benefit
- Segment clients with 5-, 7-, and 15-year assets for acceleration opportunities
- For passthroughs, coordinate timing with QBI planning and Sec. 163(j) interest limits
Clean Electricity Investment Tax Credit (Section 48E): Overview
The Section 48E Clean Electricity Investment Tax Credit (CEITC) was introduced under the Inflation Reduction Act (IRA) as a technology-neutral incentive aimed at promoting clean electricity generation and energy storage. Effective for projects placed in service after December 31, 2024, the CEITC replaced the traditional Section 48 Investment Tax Credit.IRS
Key Features:
- Eligibility: Applies to investments in qualified clean electricity generation facilities and energy storage technologies.IRS
- Base Credit Rate: 6% of the qualified investment.
- Bonus Credit Rates:
- Prevailing Wage & Apprenticeship: Additional 24% (for a total of 30%) if labor requirements are met.
- Domestic Content: Additional 10% if the project uses a certain percentage of U.S.-produced materials.
- Energy Communities: Additional 10% for projects located in designated energy communities.IRS
- Transferability: Taxpayers can transfer the credit to unrelated parties.
- Direct Pay: Certain tax-exempt entities can receive a direct payment in lieu of the credit.
Proposed Changes Under the One Big Beautiful Bill Act (OBBBA)
The OBBBA proposes significant alterations to the CEITC, aiming to scale back or eliminate several clean energy incentives established under the IRA.
1. Accelerated Phase-Out of CEITC
- Construction Start Deadline: Projects must begin construction within 60 days of the OBBBA’s enactment to qualify.
- Placed-in-Service Deadline: Projects must be placed in service by December 31, 2028.
- Impact: Projects failing to meet these deadlines would be ineligible for the CEITC, potentially affecting long-term planning and financing.
2. Elimination of Transferability and Direct Pay Options
- Transferability: The ability to transfer the credit to unrelated parties would be eliminated, restricting flexibility in monetizing the credit.
- Direct Pay: Tax-exempt entities would lose the option to receive direct payments, potentially hindering their participation in clean energy projects.
3. Introduction of Foreign Entity of Concern (FEOC) Restrictions
- Definition: Projects involving entities classified as foreign entities of concern would be ineligible for the CEITC starting in 2026.
- Implications: This could affect projects with foreign ownership or supply chains, necessitating careful review of partnerships and sourcing.
Implications for CPAs and Tax Professionals
- Project Timeline Scrutiny: Ensure clients’ projects commence construction within the stipulated 60-day window post-enactment and are placed in service by the end of 2028 to retain eligibility.
- Reevaluate Financing Structures: With the potential elimination of transferability and direct pay, alternative financing mechanisms may need to be considered.
- Assess Supply Chains: Review clients’ supply chains and partnerships to identify any associations with foreign entities of concern that could jeopardize credit eligibility.
- Stay Informed: Monitor legislative developments, as the Senate may introduce amendments affecting these provisions.
CPA Action Plan
- Immediate Action: Advise clients to expedite project planning and initiation to meet the proposed deadlines.
- Strategic Planning: Develop contingency plans for projects that may be affected by the elimination of transferability and direct pay options.
- Client Communication: Inform clients about the potential changes and their implications to facilitate informed decision-making.
Summary of Key Tax Provisions
INDIVIDUAL TAX CHANGES
| Provision | Change |
|---|---|
| Individual Tax Brackets | TCJA brackets (10%–37%) made permanent |
| Standard Deduction | TCJA-expanded amounts made permanent; increases through 2028 |
| Child Tax Credit | Increased to $2,500 through 2028, then indexed; $1,400 refundable cap |
| SALT Deduction | Raised to $40,000; phase-out starts at $500K AGI |
| Estate Tax Exclusion | Increased to $15M (from ~$13.9M); inflation-adjusted going forward |
| Overtime Income Deduction | Overtime pay deductible (2025–2028); no itemizing required |
| Tip Income Deduction | Tips deductible (2025–2028); no itemizing required |
| Auto Loan Interest Deduction | Up to $10,000 deductible (2025–2028) for new vehicle purchases |
| Trump Accounts for Children | New $1,000 tax-favored accounts for newborns (like ABLE accounts) |
BUSINESS TAX CHANGES
| Provision | Change |
|---|---|
| Bonus Depreciation | 100% expensing restored for 2025–2029 |
| Research & Experimental Expensing | Deduction reinstated for domestic R&D (2025–2029) |
| Section 179 Expensing | Deduction limits increased (exact numbers pending regs) |
| 199A QBI Deduction | Made permanent and increased from 20% to 23% |
| Opportunity Zones | Renewed and enhanced |
| Ag/Chem Special Depreciation | New bonus allowance for specialized production equipment |
| Interest on Ag/Rural Loans | Interest exclusion added for qualified rural lenders |
| Low-Income Housing Credit | Modified to improve access and effectiveness |
INTERNATIONAL + PROCEDURAL CHANGES
| Provision | Change |
|---|---|
| GILTI Rate | Adjusted to 49.2% (previously 50%) |
| FDII Rate | Adjusted to 36.5% (previously 37.5%) |
| Base Erosion Tax | Adjusted to 10.1% (instead of increase to 12.5%) |
| IRS Direct File | Terminated within 30 days of enactment |
| ERC Fraud Enforcement | $200,000 penalty on COVID-era ERC fraud promoters |
| AI Use at IRS | Mandated deployment to detect improper refunds |
GREEN ENERGY PROVISIONS PHASED OUT
| Credit or Deduction | Status |
|---|---|
| Previously Owned Clean Vehicle Credit | Ends after 2025 |
| Clean Vehicle Credit | Ends after 2026 |
| Commercial Clean Vehicle Credit | Eliminated |
| Alternative Fuel Refueling Credit | Eliminated |
| Residential Energy Efficient Property Credit | Ends after 2025 |
| Energy Efficient Home Improvement Credit | Ends after 2025 |
| Clean Energy Production Credits | Accelerated phase-out across multiple programs |
Next Steps for CPAs and Tax Professionals
- Revisit R&D clients: Immediate expensing opens big savings windows
- Accelerate cost segregation plans: Properties purchased after Jan 19, 2025, qualify for full bonus
- Model out 199A and SALT changes for high-net-worth clients
- Communicate wind-down of green energy incentives to eligible taxpayers
- Monitor Senate amendments and the reconciliation process closely
Timeline & Outlook
- House Passage: May 22, 2025 (215–214 vote)
- Senate Action: Pending; reconciliation allows GOP to pass without Democrats
- Deadline for Passage: GOP aiming for July 4, 2025
- Debt Ceiling Pressure: Mid-July deadline adds urgency
Click HERE FOR A DOWNLOADABLE ONE-PAGE PDF SUMMARY OF THE CHANGES
Need expert guidance to position your clients ahead of these sweeping changes?
Corporate Tax Advisors helps CPAs implement R&D credits, cost segregation, and specialty tax strategies nationwide. Schedule with us to learn more about how we can help your clients adapt to these sweeping changes.
