Tax Changes Under Proposed Big Beautiful Bill

The following article was provided by Whittlesey. It is reposted here with permission.

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The U.S. House of Representatives passed the “One Big Beautiful Bill Act,” May 22, 2025 a sweeping piece of legislation with significant tax implications for individuals, businesses, and nonprofit organizations.

The bill aims to extend and revise several key provisions originally introduced under the 2017 Tax Cuts and Jobs Act, while also adding new rules across domestic and international tax law. 

While the bill has not yet passed the Senate, its current form offers a preview of potential changes that may impact tax planning in the months ahead.

Here’s a breakdown of what’s included in the legislation so far: 

Business Tax Highlights 

• Qualified Business Income Deduction: The Section 199A deduction for pass-through businesses increases permanently from 20% to 23% for non-corporate taxpayers. 

• Bonus Depreciation: Restores 100% bonus depreciation for qualified property placed in service between Jan. 20, 2025, and Jan. 1, 2030. 

• Business Interest Deduction: Reverts to the more favorable EBITDA-based limitation for calculating deductible interest from 2025 through 2029. 

• Excess Business Loss Limitation: Makes the current limitation on excess business losses permanent, converting disallowed losses into net operating losses. 

• Section 179 Expensing: Increases the expensing cap to $2.5 million and the phase-out threshold to $4 million for 2025, with inflation adjustments going forward. 

• R&E Expenditures: Allows immediate expensing of domestic research and experimental costs through 2029, with an option to amortize over at least 60 months. 

• Opportunity Zones: Expands the program with revised eligibility and reporting requirements. 

• Sports Franchise Amortization: Limits the amortization of intangible assets like goodwill to 50% over 15 years for pro sports team acquisitions. 

Changes for Individuals 

• Income Tax Rates: The current individual tax brackets under the TCJA, including the top rate of 37%, are made permanent. 

• Standard Deduction: Permanently preserves the higher standard deduction, with a temporary boost through 2028. 

• Child Tax Credit: The credit is set at $2,000 per child permanently, rising to $2,500 from 2025 to 2028. 

• SALT Deduction Cap: Raises the state and local tax deduction cap to $40,400, phasing out for incomes above $505,000. 

• Itemized Deductions: Replaces the Pease limitation with a new cap for high earners, limiting the value of deductions to 35 cents on the dollar. 

International Tax Reforms 

• GILTI and FDII: Locks in effective tax rates for Global Intangible Low-Taxed Income at 10.668% and for Foreign-Derived Intangible Income at 13.335%. 

• BEAT Expansion: Raises the Base Erosion and Anti-Abuse Tax to 10.1%, with an increased rate of 12.5% for U.S. corporations owned by entities in “discriminatory foreign countries.” 

• Section 899 Update: Imposes additional taxes on income earned through entities in countries that apply unfair tax rules to U.S. taxpayers. 

Nonprofit and Foundation Impacts 

• Private Foundations: Introduces a new tiered excise tax on net investment income, ranging from 2.78% to 10%, based on asset size. 

• Colleges and Universities: Raises excise taxes on large endowments, with rates up to 21% for private institutions. 

• UBIT Expansion: Broadens the scope of Unrelated Business Income Tax to include certain fringe benefits and commercial use of an organization’s name or logo. 

Energy and Other Provisions 

• Clean Energy Credits: Phases out or eliminates certain clean electricity credits (Sections 45Y and 48E), with transitional rules for pre-approved projects. 

• Estate and Gift Tax: Permanently increases the exemption to $15 million per individual, adjusted for inflation. 

• MAGA Accounts: Creates tax-advantaged “Money Accounts for Growth and Advancement” for children under 8, with annual contribution limits. 

What Happens Next? 

The OBBB Act now moves to the Senate for further consideration.

As with any major legislation, changes are possible before it becomes law.

Individuals, business owners, and nonprofit leaders should stay alert and begin thinking about how these provisions could affect their tax planning strategies. 

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About the authors: Whittlesey advisors are closely monitoring the progress of the OBBB Act to help businesses navigate potential impacts.