Blog

July 2025   

Congress has advanced significant tax legislation under the One Big Beautiful Bill (OBBB), which has implications for businesses across various industries. The bill, passed by the House and currently under Senate consideration, includes a combination of growth incentives and targeted repeals. The Senate version of the text (link to text) provides the latest breakdown of the most impactful business tax provisions. Below is a summary of business changes, and in the coming weeks, we will detail the major credits and incentives changes. 

• R&D Expensing Restored: The bill permanently restores immediate expensing for domestic research and development (R&D) expenses. Small businesses with gross receipts of $31 million or less can retroactively expense R&D costs incurred after December 31, 2021. For all other businesses, domestic R&D expenses incurred between December 31, 2021, and January 1, 2025, can be deducted over a one- or two-year period. 
• Interest Deduction Cap Reinstated: The bill permanently reinstates the EBITDA-based limitation on business net interest deductions, reversing the shift to EBIT under prior law. 
• Bonus Depreciation Made Permanent: Businesses can now permanently claim 100% bonus depreciation for short-lived capital investments, encouraging continued capital expenditures. 
• Expensing for Structures: A temporary 100% expensing provision is introduced for qualifying structures. To qualify, construction must begin between January 19, 2025, and January 19, 2029, and the property must be placed in service before January 1, 2031. 
• Section 199A Deduction Made Permanent: The popular 20% pass-through deduction is made permanent. The bill also increases the phase-in threshold by $50,000 for single filers and $100,000 for joint filers, and introduces a minimum deduction of $400 for taxpayers with at least $1,000 of qualified business income (QBI) who materially participate in the business. 
• Charitable Deduction Floor for Corporations: A 1% floor is imposed on the deduction of charitable contributions made by corporations. 
• Section 70308 – Enhanced Advanced Manufacturing Credit (48D): The Senate version of the bill increases the Section 48D advanced manufacturing investment credit to 35% for qualified property placed in service as part of an advanced manufacturing facility, such as those producing semiconductors or related equipment. 
• Energy Credit Reforms: The bill eliminates the clean electricity production (45Y) and investment (48E) credits for projects placed in service after 2027, except for baseload power sources like nuclear, hydropower, geothermal, and battery storage. It also introduces foreign entity of concern (FEOC) restrictions and an excise tax for wind and solar projects that exceed FEOC content thresholds. 
• Other Energy Changes: 
  – Repeals the clean hydrogen production credit (45V) and the energy-efficient commercial buildings deduction (179D) after one year. 
  – Extends the clean fuel production credit (45Z) through 2030 and expands eligibility. 
  – Adds FEOC restrictions to credits including 45U, 45Z, 45Q, and 45X, and modifies phaseouts and eligibility criteria. 
• Intangible Drilling Costs: These must now be included in the calculation of adjusted financial statement income, affecting book-tax conformity. 
• Publicly Traded Partnerships: Income from hydrogen storage, carbon capture, advanced nuclear, hydropower, and geothermal energy is now included in qualifying income for certain publicly traded partnerships treated as C corporations. 

Below is the table of sections of the OBBB and the ones highlighted that we will dig into over the next few weeks.  Be on the lookout for these items: 

CHAPTER 3 — ESTABLISHING CERTAINTY AND COMPETITIVENESS FOR AMERICAN JOB CREATORS 

SUBCHAPTER A — PERMANENT U.S. BUSINESS TAX REFORM AND BOOSTING DOMESTIC INVESTMENT 

Section	Title
Sec. 70301	Full expensing for certain business property.
Sec. 70302	Full expensing of domestic research and experimental expenditures.
Sec. 70303	Modification of limitation on business interest.
Sec. 70304	Extension and enhancement of paid family and medical leave credit.
Sec. 70305	Exceptions from limitations on deduction for business meals.
Sec. 70306	Increased dollar limitations for expensing of certain depreciable business assets.
Sec. 70307	Special depreciation allowance for qualified production property.
Sec. 70308	Enhancement of advanced manufacturing investment credit.
Sec. 70309	Spaceports are treated like airports under exempt facility bond rules.

CHAPTER 5 — Ending Green New Deal Spending, Promoting America-First Energy, and Other Reforms 

Subchapter A — Termination of Green New Deal Subsidies

Section	Title
Sec. 70501	Termination of previously-owned clean vehicle credit.
Sec. 70502	Termination of clean vehicle credit.
Sec. 70503	Termination of qualified commercial clean vehicles credit.
Sec. 70504	Termination of alternative fuel vehicle refueling property credit.
Sec. 70505	Termination of energy efficient home improvement credit.
Sec. 70506	Termination of residential clean energy credit.
Sec. 70507	Termination of energy efficient commercial buildings deduction.
Sec. 70508	Termination of new energy efficient home credit.
Sec. 70509	Termination of cost recovery for energy property and qualified clean energy facilities, property, and technology.
Sec. 70510	Modifications of zero-emission nuclear power production credit.
Sec. 70511	Termination of clean hydrogen production credit.
Sec. 70512	Termination and restrictions on clean electricity production credit.
Sec. 70513	Termination and restrictions on clean electricity investment credit.
Sec. 70514	Phase-out and restrictions on advanced manufacturing production credit.
Sec. 70515	Restriction on the extension of advanced energy project credit program.

Subchapter B — Enhancement of America-First Energy Policy 

Section	Title
Sec. 70521	Extension and modification of clean fuel production credit.
Sec. 70522	Restrictions on carbon oxide sequestration credit.
Sec. 70523	Intangible drilling and development costs taken into account for purposes of computing adjusted financial statement income.
Sec. 70524	Income from hydrogen storage, carbon capture, advanced nuclear, hydropower, and geothermal energy added to qualifying income of certain publicly traded partnerships.
Sec. 70525	Allow for payments to certain individuals who dye fuel.

IRS Circular 230 Required Notice‐‐IRS regulations require that we inform you that to the extent this communication contains any statement regarding federal taxes, that statement was not written or intended to be used, and it cannot be used, by any person (i) for the purpose of avoiding federal tax penalties that may be imposed on that person, or (ii) to promote, market or recommend to another party any transaction or matter addressed herein. 

In Brief:  

• Increased Credit Amounts: Facilities in low-income communities or on Indian land can receive increased credit amounts. 

• Final Regulations Issued: The IRS issued final regulations for the Code Sec. 48E(h) program. 

• Eligible Credits: The bonus applies to the Clean Electricity Investment Tax Credit (ITC) under Code Sec. 48E. 

• Application Process: Details on the application process, allocation of capacity limitations, and required documentation for the 2025 program year. 

On January 8, the IRS issued final regulations for the Code Sec. 48E(h) Clean Electricity Low-Income Communities Bonus Credit Amount Program. This program provides additional incentives for clean electricity generation facilities located in low-income communities or on Indian land. 

Increased Credit Amounts 

The program allows investors in qualifying clean electricity generation facilities to apply for an allocation of capacity limitation, which increases the amount of the Clean Electricity Investment Tax Credit (ITC) under Code Sec. 48E for the tax year the facility is placed in service. Depending on the category of the facility, the increase is as follows: 

• 10% if the facility is located in a low-income community as defined by Code Sec. 45D(e) (Category 1). 
• 20% if the facility is located on Indian land pursuant to the Energy Policy Act of 1992 (Category 2). 
• 20% if the facility is part of a qualified low-income residential building project (Category 3). 
• 20% if the facility is part of a qualified low-income economic benefit project (Category 4). 

Final Regulations 

The final regulations define the requirements for the program and expand the list of zero-emission technologies eligible for the bonus credit. The regulations also provide guidance on the application process and selection criteria. 

Application Process 

The program’s annual allocation of 1.8 gigawatts will be distributed among the four categories as follows: 

• Category 1: Located in a Low-Income Community – 600 megawatts
  • Sub-Reservation 1: Eligible residential behind-the-meter facilities – 400 megawatts 
  • Sub-Reservation 2: Eligible front-of-the-meter facilities and non-residential behind-the-meter facilities – 200 megawatts 
• Category 2: Located on Indian Land – 200 megawatts 
• Category 3: Qualified Low-Income Residential Building Project – 200 megawatts 
• Category 4: Qualified Low-Income Economic Benefit Project – 800 megawatts 

The application period for the 2025 program year opens on January 16, 2025, and closes on August 1, 2025. Treasury expects the program to generate approximately $4 billion in public and private investment and offset energy costs by almost $350 million annually. 

Required Documentation 

Applicants need to provide the following information: 

• Facility Details: Description of the facility, including location, technology used, and expected output. 
• Category Selection: Indicate the category under which the facility qualifies (e.g., low-income community, Indian land, etc.). 
• Proof of Eligibility: Documentation supporting the facility’s eligibility for the selected category. 
• Project Plan: Detailed project plan, including timelines, budget, and expected benefits. 
• Compliance Assurance: Evidence of compliance with prevailing wage and apprenticeship (PWA) requirements, if applicable. 
• Additional Selection Criteria: Any additional information required for facilities meeting specific selection criteria, such as ownership or geographic location. 

Applications submitted within the first 30 days of the application period will be treated as submitted on the same date and time. Applications submitted after this period will be considered on a rolling basis, subject to remaining capacity. 

IRS Circular 230 Required Notice‐‐IRS regulations require that we inform you that to the extent this communication contains any statement regarding federal taxes, that statement was not written or intended to be used, and it cannot be used, by any person (i) for the purpose of avoiding federal tax penalties that may be imposed on that person, or (ii) to promote, market or recommend to another party any transaction or matter addressed herein.