The House-passed version of H.R. 1, dubbed the “One Big Beautiful Bill Act” (OBBBA), includes important revisions to business tax policy, from more permissive R&D expensing to aggressive new international measures. But as the bill moves to the Senate, its fate remains far from settled.
With an aspirational goal of passage by July 4, 2025, many of the House’s proposals are likely to face revision, delay, or removal under Senate rules. This article breaks down the key business tax provisions in the House version and outlines what finance leaders should be watching as the legislative process unfolds.
Several provisions in the House-passed bill aim to enhance or restore tax benefits related to capital investment and business deductions. These changes, if enacted, could have material implications for investment timing, R&D strategy, and financing decisions.
The bill would suspend the requirement to capitalize and amortize domestic research and development (R&D) expenditures (technically “research and experimental” under Section 174) for amounts paid or incurred in taxable years beginning after December 31, 2024, and before January 1, 2030. Under the proposal, taxpayers could elect to:
Foreign R&E expenditures would remain subject to the current 15-year amortization requirement, without the option for immediate expensing. Notably, the bill specifies that foreign capitalized R&E costs disposed of, retired, or abandoned after May 12, 2025, would not be recoverable through deduction or basis reduction: a potentially material development for multinationals with foreign research operations.
The House-passed bill contains several provisions designed to encourage capital investment by expanding or reinstating accelerated depreciation benefits. These measures, if enacted, could influence the timing of equipment purchases, facility development, and broader investment planning:
Taken together, these provisions signal a renewed legislative push to incentivize domestic capital formation, though the long-term value of these incentives will depend on their final form and whether they are made permanent or subject to future sunset.
For tax years beginning after December 31, 2024, and before January 1, 2030, the bill would revert the Section 163(j) limitation to an EBITDA-based calculation, excluding depreciation, amortization, and depletion from the interest limitation base.
This would be a more favorable outcome than the EBIT-based approach currently in effect and could increase allowable interest deductions for capital-intensive businesses.
The bill includes a series of international tax provisions that may have a material impact on companies that operate in international markets. While some provisions represent incremental adjustments, others, particularly Section 899, introduce potentially far-reaching changes for multinational enterprises.
The House bill would create new Section 899, establishing a retaliatory framework against countries that impose “unfair foreign taxes” on U.S.-linked income. Covered taxes include undertaxed profits rules (UTPRs), digital services taxes (DSTs), diverted profits taxes, and other regimes Treasury may designate as extraterritorial or discriminatory.
Under the proposal, U.S. withholding taxes on affected foreign persons would increase by 5 percentage points annually, up to a cap of 20 percentage points above the 30% statutory rate. These increases apply even when the baseline is a treaty-reduced rate—for example, a 5% rate under an income tax treaty could rise to 25% over four years.
In addition, the provision would also:
This provision was initially expected to face hurdles in the Senate, particularly under the Byrd Rule, which bars provisions that don’t directly affect federal revenue or spending or are deemed incidental to the budget. However, in a recent development, the Senate parliamentarian ruled that the provision does not violate the Byrd Rule—clearing a key procedural obstacle.
The bill proposes modest but notable revisions to international tax incentives for tax years beginning after December 31, 2025, including:
Although incremental, these adjustments would be permanent and are more favorable than the deeper cuts that are currently scheduled for 2026. In that context, these changes may present a relative benefit compared to current-law trajectories.
Several provisions in the bill would materially affect passthrough entities, particularly those in service industries. Proposed changes to SALT deduction treatment and partnership tax rules may require reevaluation of existing structures and planning strategies.
The bill would increase the SALT cap from $10,000 to $40,000, with 1% annual increases through 2033, after which the cap would be made permanent. Beginning in 2025, the deduction would be phased down, though not below $10,000, by 30% of the excess of modified adjusted gross income over $500,000 ($250,000 for single filers).
A more consequential development for businesses involves the treatment of Passthrough Entity Tax (PTET) elections. Under the proposal, partnerships and S Corporations that are not “qualifying entities”, such as passthroughs in service fields such as accounting, health care, law, consulting, financial services, investment management, athletics, and the performing arts, would be required to separately state any PTET state tax payments made on behalf of partners. These payments would no longer be eligible for deduction at the entity level, effectively nullifying the benefit of PTET elections for many passthroughs. The bill would also override prior IRS guidance (Notice 2020-75), marking a significant shift in treatment for affected partnerships and S Corporations. Qualifying entities would still benefit from the full deduction without being subject to the cap.
The bill would increase the Section 199A deduction for qualified business income from 20% to 23% and make it permanent. It would also make some changes to the phase-out of the deduction for taxpayers who do not meet the capital investment and wage expense or who operate as a “specified trade or business”. These changes would take effect for taxable years beginning after December 31, 2025, and could have a significant impact on owners of passthrough entities, particularly qualifying entities, as they would also retain the increased state tax deduction benefit from PTET elections.
The bill would broaden the scope of federal protections under Public Law 86-272 by redefining “solicitation of orders” to include activities that facilitate order solicitation, even if they serve an independent business function. This means that some internet-based activities that states currently argue exceed the protection of P.L. 86-272, such as website maintenance or online customer support, might be explicitly protected. The bill directly challenges the Multistate Tax Commission’s 2021 interpretation of activities that are not protected under P.L. 86-272.
While the provision may face procedural hurdles in the Senate, it represents a significant step toward reinforcing taxpayer protections for remote sellers.
The legislation would revise Section 707(a)(2) to make rules on disguised sales and disguised payments for services self-executing—removing the requirement for Treasury regulations to be finalized. This could have implications for taxpayers that have taken tax positions that are premised on the statute not being self-executing in areas such as fee waivers.
In addition to core cost recovery and international tax changes, the bill includes a range of provisions with potential operational and compliance implications. These measures—some technical, others punitive—underscore a broader effort to tighten enforcement and refine longstanding tax incentives.
The bill would raise the de minimis threshold for information reporting on Forms 1099-MISC and 1099-NEC from $600 to $2,000 for payments made after December 31, 2025, with the amount indexed for inflation. It would also restore the pre-ARPA threshold for Form 1099-K, so third-party settlement organizations would issue a form only when gross payments to a payee exceed $20,000 and 200 transactions in a calendar year. Together, these changes should reduce administrative burdens for businesses that issue large numbers of small-dollar payments and for online platforms that currently prepare many low-value 1099-Ks.
The bill would sharply increase oversight of the Employee Retention Credit (ERC), reflecting continued concerns over abuse. It would bar the IRS from processing any ERC claims filed after January 31, 2024, extend the statute of limitations on ERC-related assessments to six years, and impose significant penalties on promoters. These changes would heighten audit exposure for both taxpayers and advisors involved in questionable or late-filed claims; however, they are also sensitive to potential constitutional challenges due to their retroactivity.
A new limitation would apply to corporate charitable deductions for tax years beginning after December 31, 2025, allowing such deductions only to the extent they exceed 1% of taxable income. This 1% floor would operate in addition to the existing 10% cap, potentially reducing deduction availability for corporations with modest giving programs.
The bill would impose severe restrictions on renewable energy incentives, including disqualifying many technology-neutral credits under Sections 45Y and 48E for projects commencing construction more than 60 days after the enactment date. This would affect sectors such as onshore wind, utility-scale solar, and geothermal.
These changes, if included in the final version of the bill, would potentially undermine the economics of projects already in the development pipeline and would likely have significant implications for project finance and green energy developers.
Opportunity Zones: The bill authorizes a second round of Qualified Opportunity Zone designations for 2027 – 2033, coupled with a 10% basis step-up (30% for Qualified Rural OZ Funds) and deferral of post-2026 gains until December 31, 2033. The provision could change in the Senate, and its 2027 start date creates a potential capital freeze: under current law deferred gains are recognized on December 31, 2026, yet the new zones would not open until January 1, 2027—after most investors’ 180-day rollover windows have expired and possibly with a different tract map. Policymakers are exploring a grandfather rule (or short overlap) to protect projects and reinvestments that straddle the 2026-2027 boundary.
As of early June 2025, the Senate is currently in deliberations over this bill. Given the Byrd Rule’s limitations and political priorities, several provisions may be amended or excluded. As a result, finance leaders should assume that final legislation may differ substantially from the House-passed bill.
Finance leaders should monitor developments and approach current proposals with caution. As the legislative process continues to evolve, Sapowith Tax Advisory is actively monitoring developments and advising clients on how to navigate the landscape.
We provide tailored guidance on business tax planning, including cross-border and multistate considerations, helping finance leaders anticipate change, manage risk, and remain strategically positioned. Contact us to discuss how these proposals may impact your business.
This article provides general information based on the House-passed version of H.R. 1 as of May 22, 2025. The legislation remains subject to significant modification as it progresses through the Senate. Finance leaders should consult with their tax advisors to assess how potential changes may affect their planning.
This article is for general information only; it is not tax, legal, or accounting advice. Reading it does not create a client relationship with Sapowith Tax Advisory. Consult your own qualified advisers before acting on any information contained here. Sapowith Tax Advisory disclaims all liability for actions taken, or not taken, based on this content.