The One Big Beautiful Bill Act Signed into Law: Tax Implications at a Glance

Following our prior alerts on each of the House Ways & Means Committee and Senate Finance Committee versions of the One Big Beautiful Bill Act (OBBBA), the Senate passed its version of the OBBBA on July 1, 2025, returning the legislation to the House for negotiations and a final vote. The House passed a revised version of the OBBBA on July 3, 2025, which was subsequently signed into law by President Trump on July 4, 2025 (the “Final OBBBA”).

The following is a high-level summary of certain key tax provisions contained in the Final OBBBA.

I. Provisions Affecting Individual Business Owners / Investors

1. Individual Tax Rate Structure. The 37% top marginal rate that was scheduled to sunset at the end of 2025 is permanently extended under the Final OBBBA.
2. State and Local Taxes (SALT). The Final OBBBA raises the SALT deduction cap to $40,000 for taxable years 2025 through 2029 (with a 1% increase to such cap each year through 2029), subject to phaseout (down to $10,000) for single taxpayers earning over $250,000 and married taxpayers earning over $500,000. While previous versions of the OBBBA included provisions to eliminate or limit the use of the pass-through entity tax (PTET) workaround to the SALT deduction cap for certain service partnerships and S corporations, these restrictions did not make it into the Final OBBBA.
3. Estate and Gift Taxes. The Final OBBBA increases the estate, gift, and generation-skipping transfer tax exemption to $15 million per person beginning in 2026 (indexed for inflation annually thereafter).
4. Carried Interest. The Final OBBBA does not include any change to the current carried interest rules.
5. Excise Tax. The House version proposed a 3.5% excise tax on specific remittance transfers made by non-US transfer providers, with secondary liability for any unpaid amounts. The Senate version lowered the rate to 1%, which is the rate adopted by the Final OBBBA. Additionally, the Final OBBBA maintains the Senate’s exemption for transfers funded through certain US financial institutions or US-issued debit/credit cards.
6. Unfair Foreign Taxes. The Final OBBBA does not include the proposed new Section[1] 899 from prior versions of the OBBBA, which would have imposed higher tax rates on persons and entities from countries whose tax policies the US considers “discriminatory” following an understanding reached between the US and other G7 countries.
7. Qualified Small Business Stock (QSBS) Gain Exclusion. The Final OBBBA adopts the following changes to the QSBS rules that were proposed in the Senate’s version of the OBBBA: 

For more information on changes to the QSBS tax benefits, please see QSBS Benefits Expanded Under One Big Beautiful Bill Act.

II. Provisions Affecting Domestic and Foreign Businesses and Organizations

1. Qualified Business Income Deduction (Section 199A). The Final OBBBA permanently extends the 20% deduction for certain qualified business income from pass-through entities. The Final OBBBA also increases the income-based phaseout of the deduction and includes other taxpayer-favorable changes.
2. Business Interest Expense Deductions (Section 163(j)). The Final OBBBA reestablishes the cap on the deductibility of business interest expense at 30% of EBITDA (reverting back to the original cap imposed by the Tax Cuts and Jobs Act when it was initially enacted in 2017) for taxable years beginning after December 31, 2024 (i.e., retroactive to the beginning of 2025), while including new provisions that would treat certain capitalized interest expense as subject to the Section 163(j) limitation and other limitations that reduce the cap in certain circumstances.
3. Bonus Depreciation (Section 168(k)). The Final OBBBA makes permanent the 100% bonus depreciation election for qualified property acquired and placed in service after January 19, 2025.
4. Research and Development Expenditures (Section 174A). The Final OBBBA allows immediate expensing of domestic R&D expenditures starting in 2025, while continuing 15-year amortization for foreign R&D. Additionally, the Final OBBBA adopts the relief proposed by the Senate which (i) permits certain small businesses to elect to retroactively apply this provision for tax years beginning after December 31, 2021 and (ii) allows all taxpayers to elect to accelerate any remaining deductions for domestic expenditures made between January 1, 2022 and December 31, 2024 over a one- or two-year period.
5. Disguised Sales of Property or Services (Section 707(a)(2)). The Final OBBBA amends Section 707(a)(2), clarifying that the section will apply as written, rather than being subject to the regulations prescribed by the Secretary, as in the prior version. The substance of Section 707(a)(2) remains unchanged.
6. Global Intangible Low-Taxed Income (GILTI) and Foreign-Derived Intangibles Income (FDII). The Final OBBBA makes several adjustments to the GILTI and FDII regimes, including renaming GILTI and FDII to “net CFC tested income” (NCTI) and “foreign-derived deduction eligible income” (FDDEI), respectively. The effective tax rate for each of the new NCTI and FDDEI is 14% (up from 13.125%). Additionally, the Final OBBBA permanently reduces the Section 250 deduction to 40% for NCTI and 33.34% for FDDEI. The new NCTI and FDDEI regimes are applicable to tax years beginning after December 31, 2025.   
   Furthermore, the Final OBBBA eliminates the deemed 10% return rule, which previously reduced the taxable income base and incentivized investments in tangible assets abroad. This removal aims to tax the full net income without the offset for tangible assets, potentially increasing the taxable income subject to these regimes and raising the effective tax burden on intangible income generated from foreign sources.
7. Base Erosion and Anti-Abuse Tax (BEAT). The BEAT rate was initially scheduled to increase from 10% to 12.5% for tax year starting after December 31, 2025. The Final OBBBA permanently sets the BEAT rate at 10.5% for tax years beginning after December 31, 2025.
8. Limitation Against Downward Attribution. The Final OBBBA restores Section 958(b)(4), thereby eliminating downward attribution of stock owned by foreign persons to US persons for purposes of determining controlled foreign corporation (CFC) status, which had the effect of triggering burdensome (and unintended) US tax compliance obligations. In addition, as an anti-abuse measure, the Final OBBBA introduces new Section 951B, which targets “foreign controlled US shareholders” (FCUSs) and “foreign controlled foreign corporations” (FCFCs) in order to prevent large multinational groups from owning certain subsidiaries through US entities in order to avoid CFC status.

III. Provisions Affecting Renewable Energy Businesses

1. Clean Electricity Production Credit (Section 45Y) and Clean Electricity Investment Credit (Section 48E). Under the Final OBBBA, solar and wind projects that begin construction before July 5, 2026 will remain subject to the current completion deadlines under the Internal Revenue Service guidance (generally requiring projects to be placed in service within four calendar years after the year in which construction begins, which would be 2030 for projects beginning construction in 2026) to qualify for the production tax credits or investment tax credits. Notwithstanding the above, the Trump administration issued an executive order on July 7, 2025, directing the US Treasury Department to, within 45 days, revisit the beginning of construction guidance with respect to solar and wind facilities to ensure that the policies concerning “beginning of construction” are not circumvented, including by “preventing the artificial acceleration or manipulation of eligibility and by restricting the use of broad safe harbors unless a substantial portion of a subject facility has been built.” 

   For solar and wind projects beginning construction after July 4, 2026, the project must be placed in service prior to January 1, 2028 to qualify for the desired credit. 

   For all other types of technologies (other than solar and wind), projects must begin construction prior to January 1, 2034 to qualify for the full credit. The credit begins to phase down in 2034 and will be eliminated in 2036. 

2. Zero-Emission Nuclear Power Production Credit (Section 45U). The Final OBBBA omits the phaseout schedule that was proposed in earlier versions. The termination date for this credit remains unchanged, set for December 31, 2032. 
3. Advanced Manufacturing Production Credit (Section 45X). The Final OBBBA eliminates credits for wind components sold after 2027 and adopts a phaseout for critical minerals that eliminates credits for critical minerals (other than metallurgical coal) sold after 2033. 
4. Transfer of Tax Credits (Section 6418). The Final OBBBA generally preserves transferability, subject to restrictions on transferring credits to a prohibited foreign entity, discussed below. 

5. Prohibited Foreign Entity (PFE). The Final OBBBA makes “prohibited foreign entities” (PFEs) ineligible for clean energy tax credits and denies certain credits for taxpayers that receive “material assistance” from PFEs. The PFE regime generally targets entities associated with jurisdictions considered adverse to the US — primarily China, Russia, Iran, and North Korea. 

   A taxpayer will be considered to receive “material assistance” from a PFE if (i) the taxpayer receives manufactured products (including component parts) from a PFE and (ii) the cost ratio of such products compared to the total material costs that are paid or incurred for production of eligible components is less than a specified threshold percentage. 

   The restriction on “material assistance” from a PFE will apply to projects that begin construction after December 31, 2025. Additionally, equipment purchased pursuant to a binding contract entered into prior to June 16, 2025 is exempt from the material assistance restrictions if the project begins construction before August 1, 2025 and is placed in service before January 1, 2030.

IV. Final Thoughts

The Final OBBBA permanently enacts several taxpayer-friendly provisions, including enhancements to the QSBS rules, an increased cap on the SALT deduction, and the extension of certain business deductions. However, the revisions to energy tax credits will require businesses in the clean energy sector to reassess their project timelines to capitalize on the remaining incentives before they are fully phased out.

Please reach out to Gregg Benson, Tim Santoli, Liz Allison, or your Mintz relationship attorney if you have any questions regarding the Final OBBBA.

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