OBBBA

Article Danielle Camara

The One Big Beautiful Bill Act (OBBBA), passed in July 2025, introduces changes to tax regulations that significantly affect real estate investors. One of the most important changes is the restoration of 100% bonus depreciation, making cost segregation studies an even more compelling tax strategy. 

What is a Cost Segregation Study and Why Consider It?

An investor can use a cost segregation study to allocate the basis of real property into specific asset classes, allowing for accelerated depreciation deductions for certain asset classes. In fact, any qualified improvement property or personal property will be eligible for 100% bonus depreciation, making it deductible in the year the property is purchased and placed in service. This includes building components and land improvements such as flooring, windows, fencing, and sidewalks. 

Quantifying the Impact

The example below illustrates the tax benefit of depreciation using a cost segregation study for a taxpayer who acquires a $3 million commercial property in 2025.

Tax Benefit without Cost Segregation:

  • Land allocation: $600,000 (not depreciable)
  • Entire building: $2,400,000 – depreciated over 39 years
  • Annual depreciation: $61,538
  • First-year tax benefit (37% bracket): $22,769

Tax Benefit with Cost Segregation and 100% Bonus Depreciation (Restored by OBBBA):

  • Land allocation: $600,000 (not depreciable)
  • Building allocation: $1,800,000 (39-year depreciation = $46,154 annually)
  • Qualified improvements identified by study: $600,000 (immediately deductible)
  • Total first-year deductions: $646,154
  • First-year tax benefit (37% bracket): $239,077

The restoration of 100% bonus depreciation and a cost segregation study transforms a $22,769 first-year tax benefit into a $239,077 benefit, more than tenfold increase. This example demonstrates how investors can accelerate depreciation deductions, reduce their tax liability, increase cash flow, and enhance overall return on investment.

Considerations in Advance

Before initiating a cost segregation study, taxpayers should evaluate their specific tax position and property characteristics to determine the eligibility and potential tax savings. They should also gather available property documentation, including recent appraisals, site maps or surveys, closing documents at time of purchase, and architectural or construction plans. 

Eligible Properties

Properties that are eligible for depreciation are eligible for cost segregation studies, including both residential and commercial properties. While this strategy can be applied broadly, it proves most effective on larger projects since the expected benefit correlates to the total cost of the project.

Timing the Study

Taxpayers can initiate a Cost Segregation Study at three key phases:

  • When purchased or constructed: Investors can commission a study on a newly acquired or constructed property. The study should be completed prior to the filing of the tax return for the year the property was placed in service, allowing for depreciation of the various components according to the classifications as set out in the study.
  • Retroactively: Investors can perform a study on properties placed in service in prior years. However, this requires filing a Form 3115 to claim the depreciation that would have been allowed. Note that bonus depreciation rates were less than 100% in 2023 and 2024, diminishing the benefits. 

In Summary

A cost segregation study is a strategic tax planning tool that allows real estate investors to accelerate depreciation deductions, resulting in significant tax deferrals and increased cash flow, particularly in the early years of ownership. It is especially valuable for newly constructed buildings, renovations, or acquisitions, and may also be applied retroactively. By front-loading depreciation, businesses can reinvest savings, improve ROI, and enhance financial performance.

To explore the applicability of this strategy to your specific situation, please contact Dean Dorton’s real estate team.

Article Autumn Hines

On October 21, the IRS issued transitional guidance for businesses required to report car loan interest under the One Big Beautiful Bill Act (OBBBA). Notice 2025-57 provides penalty relief and guidance to lenders on new information reporting requirements for car loan interest received in 2025.

Background

For tax years 2025-2028, individuals may deduct up to $10,000 annually of interest paid on a loan used to purchase a “qualified vehicle.” The indebtedness must be incurred by the taxpayer after December 31, 2024, for the purchase of a passenger vehicle for personal use.

A qualified vehicle includes a new car, minivan, van, SUV, pick-up truck, or motorcycle with a Gross Vehicle Weight rating of less than 14,000 pounds that has undergone final assembly in the United States.

The potential deductibility of this interest necessitates new reporting requirements for businesses that receive interest of $600 or more from any individual in a calendar year on a loan for a qualified vehicle. Section 6050AA(b) prescribes the information that must be reported, which includes:

  • The name and address of the individual from whom the interest was received.
  • The amount of interest received for the calendar year.
  • The amount of outstanding principal on the qualified vehicle loan as of the beginning of such calendar year.
  • The date of origination of such a loan.
  • The year, make, model, and vehicle identification number of the applicable passenger vehicle that secures such a loan; and
  • The name, address, and phone number of the recipient of the interest payment.

Transitional Relief for 2025 – Simplified Reporting Allowed

The Treasury Department and the IRS recognize that interest recipients require additional time to make necessary changes to their systems to achieve full compliance with the extensive information reporting requirements under section 6050AA.

Businesses receiving interest on a qualified vehicle loan in 2025 will satisfy the reporting obligations if they make a statement available to borrowers on or before January 31, 2026, reporting the amount of interest received in calendar year 2025 on a qualified vehicle loan.

Acceptable methods of reporting this information include, but are not limited to:

  • via an online account portal that the individual can easily access; 
  • a regular monthly statement;
  • an annual statement that is provided to the individual; or
  • by other similar means designed to provide accurate information to the individual regarding the total interest.

The IRS will not impose penalties on businesses for a failure to file information returns or provide statements to borrowers if they satisfy the above requirements for interest received in 2025. The information does not need to be reported to the IRS in 2025.

For questions on Notice 2025-57 or other provisions of the OBBBA, contact your Dean Dorton or other professional advisor.

Article Autumn Hines

For businesses, one of the most favorable aspects of the One Big Beautiful Bill Act (OBBBA) is the return of 100% bonus depreciation for property acquired and placed in service after January 19, 2025. This tax incentive allows businesses to immediately deduct the cost of eligible property in the year it is placed in service, rather than depreciating the cost over several years.

The Tax Cuts and Jobs Act of 2017 (TCJA) temporarily provided for 100% bonus depreciation for qualified property acquired and placed in service after September 27, 2017, and before January 1, 2023. For property placed in service in 2023 and later years, the bonus depreciation percentage is phased down by 20% per year through 2026.

Property eligible for bonus depreciation includes:

  • Property depreciable under the Modified Accelerated Cost Recovery System with a recovery period of 20 years or less;
  • Computer software;
  • Water utility property;
  • Qualified film, television, and live theatrical productions; and
  • Qualified Improvement Property (i.e., improvements made by the taxpayer to the interior portion of nonresidential real property).

Most tangible personal property and certain land improvements qualify for bonus depreciation.

To be eligible, the original use of the property must begin with the taxpayer. For property acquired and placed in service after September 27, 2017, used property also may qualify if it was not previously used by the taxpayer or a related party. In addition, the property must be used predominantly within the United States.

The OBBBA makes 100% bonus depreciation permanent for property acquired and placed in service after January 19, 2025. Generally, property is “acquired” on the date a written, binding contract is entered into for its acquisition. Property is “placed in service” when it is available for its intended use.

For property acquired on or before January 19, 2025, the original TCJA phase-down schedule still applies. This is an important distinction. For example, assume a taxpayer acquired a piece of equipment on January 19, 2025, and placed it in service the same day. Under the TCJA phase-down schedule, the bonus depreciation rate for that piece of equipment is 40%. If the same piece of equipment were acquired and placed in service on January 20, 2025, it would be eligible for 100% bonus depreciation, assuming all other requirements are met.

Takeaway

The return of 100% bonus depreciation provides an incentive for businesses to invest in capital assets. If you have questions about the changes to bonus depreciation or other OBBBA topics, contact your Dean Dorton or other professional advisor.

Article Sam Stephenson

For companies in the life sciences sector, choosing the right legal structure for your business is a critical step with lasting tax, fundraising, and strategic implications. Whether you’re launching a biotech startup, developing a new medical device, or scaling an established pharmaceutical company, your entity choice can impact everything from how you raise capital to how your company is taxed and what liability protections you receive.

Below, we outline the key entity types commonly used in the life sciences industry, along with their tax advantages, limitations, and strategic considerations.

Single-Member LLC

A single-member LLC is a simple, flexible structure for businesses with one owner. It is typically treated as a disregarded entity for federal tax purposes, meaning the business’s income and expenses flow directly through to the owner’s personal tax return.

Tax Considerations

  • No separate federal income tax return is required (unless the business has employees or excise tax obligations).
  • An Employer Identification Number (EIN) may still be required.
  • SMLLCs may qualify for the federal research credit, which supports companies conducting qualified R&D in fields like biotechnology, engineering, and physical sciences.

Fundraising & Liability

  • Funded through personal assets, loans, or grants.
  • Provides liability protection for the owner.

This structure is often used in the early stages of a company’s development before additional investors or owners come on board.

Partnership

A partnership involves two or more owners who agree to carry on a business for profit. Like a single-member LLC, partnerships are pass-through entities for tax purposes.

Tax Considerations

  • The partnership files an informational return, but the income is taxed at the partner level.
  • Partnerships can allocate income, deductions, and credits to maximize tax efficiency across partners.
  • Partners’ tax basis (i.e., their investment in the partnership) changes with liabilities and contributions, which can affect how distributions or losses are treated.
  • The research credit is passed through to partners in proportion to their ownership.

Fundraising & Liability

  • Can be funded similarly to single-member LLCs with personal assets, loans, or grants, in addition to equity and admission of new partners.
  • General partnerships may expose partners to liability; limited partnerships and LLPs offer more protection.

S Corporation

An S Corporation is a tax election made by a qualifying domestic corporation that allows income and losses to pass through to shareholders for federal tax purposes, but offers some aspects of a C-Corporation structure.

Tax Considerations

  • Avoids corporate-level taxation.
  • Potential savings on self-employment taxes for shareholders.
  • Shareholders must receive a reasonable salary for their work within the S-Corporation.
  • Shareholders are taxed on their share of income relative to their ownership percentage regardless of whether distributions are made.
  • The research credit is passed through to shareholders in proportion to their ownership.

Limitations

  • Only U.S. citizens or residents can be shareholders.
  • Cannot exceed 100 shareholders or issue more than one class of stock.
  • Venture capital and foreign investment are generally not permitted.

Fundraising & Liability

  • Limited in fundraising flexibility due to shareholder restrictions.
  • Offers limited liability protection, important for companies exposed to regulatory or product-related risks.

C Corporation

The C Corporation is the most common structure for high-growth life science companies, particularly those seeking venture capital or preparing for IPOs.

Tax Considerations

  • Pays a flat 21% federal income tax rate.
  • Subject to double taxation: profits are taxed at the corporate level and again when distributed as dividends.
  • Eligible for a range of deductions and credits, including the research credit and the general business credit.
  • Required to make quarterly estimated tax payments if tax liability exceeds $500.

Key Advantage – Section 1202 Stock

C Corps can issue Qualified Small Business Stock under Section 1202, which allows eligible shareholders to exclude up to 100% of capital gains from the sale of stock held for at least five years. This is a significant tax incentive for investors and founders in the life science industry.

Fundraising & Scalability

  • No restrictions on number or type of shareholders.
  • Can issue multiple classes of stock and offer equity-based compensation to employees.
  • Preferred structure for raising venture capital and issuing stock under SEC regulations.

Governance

  • Must maintain a formal structure with a board of directors and corporate officers.

Final Thoughts

For life sciences entrepreneurs, choosing the right entity structure is about more than just legal formalities – it can shape your company’s funding options, risk exposure, tax liability, and long-term growth.

Before making a decision, consult with tax and legal advisors who understand the unique needs of life sciences businesses. The right structure today can lay the foundation for tomorrow’s breakthroughs.