On July 4, 2025, President Trump signed the One Big Beautiful Bill Act (OBBBA) into law.  This bill contains many provisions relevant to US manufacturers, most favorable as the bill was intended to encourage manufacturing in the US. Nearly every US manufacturer will be impacted by this sweeping tax legislation.

Key Provisions and Impacts on Manufacturing:

Bonus Depreciation

The OBBBA permanently reinstates 100% bonus depreciation for eligible assets acquired and placed in service after January 19, 2025.

Bonus Depreciation for Qualified Production Property

Under the OBBBA, businesses will be allowed to fully and immediately deduct the cost of building new qualified manufacturing facilities. This temporary provision is retroactive to January 19, 2025, and continues for construction that begins before January 1, 2029. There are special provisions for buildings also containing retail operations and leased buildings. This is a win for manufacturers expanding operations. 

Increased Asset Expensing

The OBBBA increases the maximum amount a taxpayer may expense (generally equipment) from $1 million to $2.5 million annually, effective for property placed in service in taxable years beginning after December 31, 2024. This is IRC Section 179, which is similar to bonus depreciation but has different rules and requirements. 

Permanent Tax Relief for S Corps and Partnerships 

The OBBBA makes permanent a special deduction for pass-through entities, which are common structures for small businesses, allowing them to compete more effectively with larger corporations. The bill makes the Sec. 199A qualified business income (QBI) deduction permanent and keeps the deduction rate at 20%.

Business Interest Limitation 

The OBBBA restores the original, more favorable EBITDA-type calculation of the business interest deduction limit for tax years beginning in 2025 and beyond.

Deduction for Research and Experimental Expenses

The OBBBA permanently reinstates immediate expensing of domestic research and experimental expenditures for taxable years beginning after December 31, 2024.  The bill also provides “transition” rules for R&E expenses required to be capitalized and amortized in prior years. Foreign R&E expenses remain subject to capitalization and a 15-year amortization period. 

International Tax

The OBBBA includes changes to certain international tax provisions in the US tax code, including GILTI, FDII, BEAT, and the CFC rules. The bill decreases the Sec. 250 deduction percentage for tax years beginning after Dec. 31, 2025, to 33.34% for foreign-derived intangible income (FDII) and 40% for GILTI, resulting in higher tax liabilities on foreign income. The effective tax for both GILTI and FDII is 14%. NOTE – the final bill removed section 899, the so-called “revenge tax” aimed at countries implementing Pillar Two taxes. This section 899 removal is a win for taxpayers with foreign ownership. 

Form 1099 Reporting Threshold Increase

The OBBBA provides compliance relief by increasing the information reporting threshold for Forms 1099-NEC and 1099-MISC from $600 to $2,000, indexed for inflation, effective for payments made in 2025 and beyond. The new $2,000 threshold will be adjusted for inflation in calendar years after 2026.

Clean Energy Manufacturing Incentives

The OBBBA will eliminate most energy-related tax credits and incentives, potentially harming US clean energy manufacturers.

If you have questions about how these potential changes could impact you and your business, please contact your Dean Dorton advisor.