Tax Provisions in the Proposed One, Big, Beautiful Bill Act for Manufacturers
Posted by Jonathan Roller on June 17, 2025
Please note that the articles dated June 2025 reflect proposed tax legislation as it stood at the time of publication.
The proposed One, Big, Beautiful Bill Act (OBBBA) includes several significant tax provisions that will impact the U.S. manufacturing industry. Here are the main points:
1. Bonus Depreciation
- Current Law: Under the Tax Cuts and Jobs Act (TCJA), first-year bonus depreciation for qualified assets (e.g., manufacturing equipment) has been phasing down since 2023 and is set to drop to 0% by 2027.
- Proposed Change: The OBBBA would reset bonus depreciation to 100% for eligible property acquired and placed in service between January 19, 2025, and January 1, 2030.
2. Section 179 Expensing Election
- Current Law: Allows businesses to deduct the cost of purchasing eligible assets up to an annual limit, which is $1.25 million for 2025, with a phaseout threshold of $3.13 million.
- Proposed Change: The OBBBA would increase the expensing limit to $2.5 million and the phaseout threshold to $4 million for property placed into service after 2024. These amounts would continue to be adjusted annually for inflation.
3. Section 199A Qualified Business Income (QBI) Deduction
- Current Law: Provides a 20% deduction on QBI for owners of pass-through entities, available through 2025.
- Proposed Change: The OBBBA would make the deduction permanent and increase the deduction amount to 23% for tax years beginning after 2025.
4. Domestic Research and Experimental Expenditures
- Current Law: Requires these expenses to be amortized over five years.
- Proposed Change: The OBBBA would temporarily reinstate a deduction for eligible research and development costs incurred between 2024 and 2030, allowing taxpayers to choose between deducting or amortizing these expenses.
5. Pass-Through Entity “Excess” Business Losses
- Current Law: Limits business losses incurred by noncorporate taxpayers to offset other income sources, with excess losses carried forward to later tax years.
- Proposed Change: The OBBBA would make this limitation permanent.
Additional Provisions
- The OBBBA also proposes to reduce or rescind many green-energy-related tax breaks.
Legislative Process and Impact
- The bill has passed the U.S. House of Representatives and is subject to changes as it moves through the Senate and possibly back to the House.
- Manufacturers should stay informed about potential tax law changes and consult with tax professionals for the latest updates.
The proposed OBBBA presents significant changes to the tax landscape that manufacturers need to be aware of. With provisions that enhance bonus depreciation, increase Section 179 expensing limits, and make the QBI deduction permanent, among others, the bill aims to provide substantial benefits to the manufacturing sector. However, as the legislation progresses through the Senate and potentially back to the House, manufacturers should stay vigilant and consult with tax professionals to navigate these changes effectively. Keeping abreast of these developments will be crucial for leveraging the potential advantages and ensuring compliance with the new tax regulations.
Please note that the tax law discussed in this article is currently proposed and has not yet been enacted.
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Jon leads audits, reviews, compilations, tax, and consulting services for manufacturers, contractors, and other commercial business entities. He serves as the audit practice leader for the Firm's manufacturing and construction niches and manages the Firm’s pre-qualification to perform third-party reviews of tax credit applications for the Film Industry according to agreed-upon procedures established and published by Empire State Development (ESD). In addition, Jon serves a variety of exempt organizations.