President Donald J. Trump signed the legislation commonly known as the “One Big Beautiful Bill” (Tax Act) into law on July 4, 2025. We explore five key takeaways for fund sponsors, investors, and the broader asset management community.
1. No retaliatory tax provisions
Earlier versions of the Tax Act proposed a new section 899 to the Internal Revenue Code, which would have imposed a retaliatory tax on countries enacting digital services taxes (DSTs), undertaxed profits rules (UTPR), diverted profits taxes, or other foreign taxes deemed by the Secretary of the United States Department of the Treasury to affect persons in the United States disproportionately.
This provision raised significant concerns in the investment funds sector, where it was viewed as potentially discouraging foreign investment. The final version of the Tax Act does not include this provision.
2. Modification of excise tax on certain university endowments
The Tax Act modifies the current excise tax under section 4968 of the Internal Revenue Code, which is imposed on certain large private universities and their endowments. The Tax Act introduces graduated rates, based on a university’s “student adjusted endowment,” as compared to a flat 1.4-percent rate under current section 4968.
The Tax Act also modifies the qualifications for the amended section 4968 excise tax to apply. Under current law, the excise tax applies to universities (and their endowments) if the university has a student population of at least 500 students. The Tax Act increases this threshold to 3,000 tuition-paying students.
The Tax Act also introduces a requirement that the university participated in a federal student financial aid program under Title IV of the Higher Education Act of 1965 during the preceding taxable year.
The changes apply to taxable years beginning after December 31, 2025.
3. No changes to carried interest taxation
Despite earlier proposals to tax carried interest at ordinary income tax rates, the Tax Act maintains the current tax treatment of carried interest.
4. Increase in the taxable REIT subsidiary limit
The Tax Act increases the limit on the amount of assets a real estate investment trust (REIT) can hold through taxable REIT subsidiaries from 20 percent to 25 percent. This change applies to taxable years beginning after December 31, 2025.
5. Section 199A deduction made permanent
The Tax Act makes permanent the section 199A deduction for ordinary REIT dividends and other pass-through business income. While earlier versions of the bill proposed increasing the deduction rate, the final Tax Act retains the existing 20-percent rate.
[View source.]
