What Businesses Need To Know

On July 4, 2025, the One Big Beautiful Bill Act (OBBB) was signed into law, introducing sweeping tax reforms that aim to strengthen U.S. businesses through faster cost recovery. By allowing companies to deduct expenses more quickly, the Act enhances cash flow, reduces the after-tax cost of investments, and creates powerful incentives for innovation and growth.

In this blog, we highlight three key provisions of the OBBB that permanently reshape how businesses can expense their investments.

1. Immediate Expensing of U.S. R&D (Section 174)

The OBBB permanently restores the ability for companies to immediately deduct domestic research and development (R&D) expenses, effective for tax years beginning after December 31, 2024.

• Catch-up opportunity: Companies with capitalized R&D costs from 2022–2024 can elect a one-time deduction to expense those costs immediately.
• Small business advantage: Firms with less than $31 million in average annual gross receipts may retroactively apply full expensing to tax years beginning after 2021.
• Foreign R&D limitation: Research conducted outside the U.S. must still be amortized over 15 years.

Example: A technology startup developing custom software or new product prototypes in the U.S. can now deduct the full cost of its R&D activities in the same year, freeing up resources for reinvestment.

2. Bonus Depreciation (Section 168)

The Act permanently reinstates 100% bonus depreciation for qualified property acquired and placed in service after January 19, 2025. This means businesses can write off the full cost of eligible assets in the first year instead of depreciating them over time.

• Eligible property: Equipment, machinery, technology infrastructure, and certain business vehicles.
• Special rule for heavy vehicles: Passenger vehicles with a gross vehicle weight rating (GVWR) above 6,000 pounds also qualify for full expensing, provided they are used more than 50% for business purposes.
• Requirements: The property must be primarily used for business, it can be new or pre-owned (first use by the taxpayer), and it must be placed in service after the effective date.

Example: A business owner purchasing new SUV (over 6,000 pounds) for regular client visits can immediately deduct the full purchase price, significantly lowering taxable income.

3. Qualified Production Property (Section 168(n))

The OBBB introduces a new elective regime for qualified production property, allowing 100% immediate depreciation for certain large-scale facilities.

• Covered facilities: Manufacturing plants, agricultural production facilities, chemical plants, and refineries.
• Construction timeline: To qualify, construction must begin after January 19, 2025, and before January 1, 2029, with the facility placed in service by December 31, 2030.
• Exclusions: Non-production areas such as offices, lodging, parking, and sales space do not qualify.

Example: A mid-sized agricultural producer building a new processing facility can recover the entire cost once the facility is operational, rather than spreading depreciation over decades.

Why These Provisions Matter

• Improved cash flow: Immediate deductions allow businesses to reinvest sooner.
• Lower investment risk: By reducing the after-tax cost of assets and R&D, companies can pursue larger and more ambitious projects.
• Global competitiveness: These measures position the U.S. as a more attractive environment for innovation and manufacturing.
• State considerations: Some states may not conform to these federal rules, so businesses should consult advisors to maximize benefits.

Conclusion

The OBBB’s accelerated amortization provisions represent one of the most significant tax shifts in recent years. By restoring immediate expensing for U.S. R&D, reinstating 100% bonus depreciation, and creating new opportunities for production facilities, the law gives businesses powerful tools to reduce taxable income and strengthen their long-term growth strategies.

As always, careful planning and professional guidance will be key to unlocking the full benefits of these changes.