Five M&A Tax Wins from the One Big Beautiful Bill

Within the dynamic market of corporate development and finance, legislative reforms can either prime or stall the machinery of business activity. Passed on July 4, 2025, the One Big Beautiful Bill Act (OBBB) has emerged as a centerpiece of economic transformation, as the bill consolidates various financial, tax and regulatory provisions into a single, comprehensive piece of legislation. The Mergers and Acquisitions (M&A) ecosystem is poised to experience significant ripple effects, primarily due to the following tax reforms outlined below.

1. Bonus Depreciation: Previously, the Tax Cuts and Jobs Act (TCJA) which passed as law in 2017, provided for an additional first-year depreciation deduction for qualifying property (recovery period of 20 years or less) acquired by a business. The bonus depreciation benefits were subject to sunset provisions whereby the original 100 percent first-year deduction allowed from 2017 to 2022 was reduced by 20 percent each year beginning for property placed in service after Dec. 31, 2022. For property placed in service after Dec. 31, 2024, and before Jan. 1, 2026, a 40 percent bonus depreciation deduction was allowed. The OBBB raised Section 168 depreciation from 40 percent to 100 percent indefinitely for property placed in service after Jan. 19, 2025. In addition, the OBBB introduced Section 168(n), a new section of the tax law that would allow for a 100 percent deduction for certain qualified real property. This change will increase after-tax returns for asset-intensive companies.
2. Immediate Expensing: For the 2024 tax year, Section 179, which relates to qualifying equipment and/or software purchased during the tax year, allowed immediate expensing of up to $1.22 million of expenses, with a phase-out of such deduction if the property placed in service exceeds $3.05 million (note, immediate expensing and phase outs are adjusted each year for inflation). The OBBB increased the immediate expensing and related phase out thresholds for tax years beginning after Dec. 31, 2024, to $2.5 million and $4 million, respectively. Both bonus deprecation and immediate expensing are expected to significantly affect asset-intensive entities as the ability to expense greater proportions of qualifying assets will lead to increased tax advantages.
3. Research and Development (R&D) Immediate Expensing: Historically, R&D expenses were capitalized and depreciated over five years. The OBBB allows for immediate expensing of R&D costs, which will benefit industries heavily invested in innovation and technology for their tax returns.
4. Business Interest Deductions: For tax years beginning after Jan. 1, 2022, businesses historically could only deduct 30 percent of earnings before interest and taxes (EBIT) as interest expense. The OBBB increases the cap back to 30 percent of EBITDA, as adding depreciation and amortization to the cap calculation significantly increases the amount of interest eligible for deduction.
5. Increased Flexibility for Qualified Small Business Stock: Qualified Small Business Stock had previously been defined as C-corps with less than $50 million in assets. The sale of stock from these qualified companies could be deducted on tax returns up to $10 million. The OBBB increased the asset cap and maximum deduction amount to $75 million and $15 million, respectively. Interestingly, this could create more opportunities for additional investments and sales of businesses that qualify as “Small Businesses.”

Change Creates Opportunities

These provisions from the OBBB are expected to increase cash flow for many companies, which can allow for significant growth and investment opportunities. Therefore, companies looking to sell must be agile to align with these new provisions and position themselves as attractive assets on the sell-side. Additionally, acquirers must seize growth opportunities in industries favorably impacted by the OBBB. If you have any further questions about how the OBBB impacts your future prospects in dealmaking, please contact Grant Couper and consider scheduling your OBBB impact consultation using the form below.