This article is Part Three of a multi-part analysis by KJK summarizing the OBBBA’s implications for various taxpayers and industries.
The One Big Beautiful Bill Act (OBBBA) introduces sweeping reforms to the federal tax code, many of which have lasting implications for businesses and their owners. The provisions highlighted below address key tax considerations for pass-through entities, capital investment, research and development, and other business-related deductions.
Businesses and Business Owners
Bonus Depreciation
The Act permanently restores 100% bonus depreciation for qualified property acquired and placed in service on or after January 20, 2025. It also creates a new elective 100% depreciation allowance for qualified production property, which is defined as specific portions of nonresidential real estate used in manufacturing, production, or refining. This allowance applies to property placed in service through 2031, with construction required to begin by 2028. Property that ceases to qualify will be subject to a 10-year recapture rule.
KJK Take: Immediate expensing of assets such as machinery, equipment, vehicles, and aircraft continues to be a valuable planning tool for businesses making large capital investments. The new production property allowance adds an incentive for companies engaged in U.S.-based manufacturing and production activities.
Research & development (R&D) expenditures
Starting in 2025, taxpayers may permanently choose between immediately deducting domestic R&D costs or capitalizing and amortizing them over a minimum of five years. Transition rules allow certain expenses paid before 2025 to be deducted or amortized over one or two tax years, with additional relief for small businesses.
KJK Take: This reverses the TCJA’s earlier change that required amortization of R&D costs. Companies engaged in product development or software innovation should review their tax strategies to take advantage of these expanded deductions.
De Minimis Import Rule Changes
The OBBBA imposes new civil penalties for the misuse of the Section 321 de minimis import exemption, which currently allows goods valued under $800 to enter the United States duty-free. Beginning in 2025, importers who improperly claim this exemption may face penalties up to $5,000 for a first violation and $10,000 for subsequent violations. These provisions respond to concerns about misuse of the exemption, particularly in connection with high-volume, low-value shipments commonly used by eCommerce and cross-border logistics providers. Additionally, the Act phases out the de minimis exemption entirely by July 1, 2027.
KJK Take: Businesses that depend on small-package imports, such as online retailers and direct-to-consumer brands, must review compliance practices and vendor oversight. Heightened penalties increase the risk of financial exposure from misclassification or documentation errors. Companies should act now to educate suppliers, ensure accurate customs reporting, and consider supply chain adjustments in light of the 2027 repeal.
Pass-Through Entities and the QBI Deduction
The OBBBA makes permanent the 20% Qualified Business Income (QBI) deduction for pass-through entities such as partnerships, disregarded entities, and S corporations. Beginning in 2026, the phase-in limitation range will increase to $150,000 for joint filers and $75,000 for all others, with a $400 minimum deduction for active QBI.
KJK Take: With the QBI deduction now permanent and combined with the expanded Qualified Small Business Stock (QSBS) exclusion, many business owners should revisit whether their entity structure—pass-through versus C corporation—remains optimal for their long-term goals.
Excess business loss carryforwards
The Act makes permanent the excess business loss limitation under Section 461(l) of the Internal Revenue Code, which restricts the amount of net business losses that non-corporate taxpayers can deduct each year. For 2025, the inflation-adjusted thresholds are approximately $313,000 for single filers and $626,000 for joint filers. These thresholds will continue to be adjusted annually using the existing inflation formula established under the TCJA. The Act does not modify the inflation adjustment base year or reduce the statutory base amounts.
KJK Take: Non-corporate taxpayers using losses from pass-through entities must account for this permanent limitation when planning future loss utilization strategies. Proposals to eliminate the ability to convert disallowed losses into Net Operating Losses (NOLs) were not included in the final bill.
Business interest deduction
The Act reinstates the EBITDA (earnings before interest, taxes, depreciation, and amortization) limitation for business interest deductions. Adjusted taxable income will once again exclude depreciation, amortization, or depletion from the calculation.
KJK Take: While this rule applies to both pass-through entities and C corporations, it will most often impact larger corporations. Smaller pass-through businesses with average gross receipts below $31 million will generally remain unaffected.
Charitable Deduction Floor for Corporations
The Act introduces a 1% floor for corporate charitable contributions. Deductions are allowed only for contributions that exceed 1% of taxable income and remain capped at 10%. Excess contributions can be carried forward for five years, while contributions below the 1% floor can only be carried forward from years in which contributions exceed the 10% cap.
KJK Take: Corporate charitable planning will need to account for this new threshold, particularly for companies whose giving fluctuates year to year.
Looking Ahead
The OBBBA’s changes to business-related taxes are among the most significant reforms in recent years. By making key deductions permanent and introducing new incentives for capital investment, the legislation provides clearer rules for long-term planning. At the same time, stricter compliance measures, like the new penalties for de minimis imports, demand careful attention to operational details. Business owners should work closely with their advisors to reevaluate entity structure, align capital expenditures with incentive timelines, and adjust compliance processes to mitigate risks.
