The One Big Beautiful Bill for U.S Business Tax-Company Formation_Trademark Registration_Tax Service - Hong Kong CPA

KNOWLEDGE

Hot Labels

hong kong company singapore company u.s. business bank account hong kong catering business

Service Scope KAIZEN CPA provides Audit , Accounting, Tax Advisory, Hong Kong Company Formation, Offshore Company Registration, China Company Formation, Trademark Registration, Tax Service.

The One Big Beautiful Bill for U.S Business Tax

【Font：L M S】

The One Big Beautiful Bill for U.S Business Tax

The era of temporary tax relief is drawing to a close. The "One Big Beautiful Bill" (OBBBA) represents a significant and comprehensive legislative effort to establish permanent U.S. business tax reform. Building upon and modifying provisions from the earlier Tax Cuts and Jobs Act (TCJA), this bill aims to provide long-term certainty for businesses by making key incentives permanent, enhancing others, and introducing new measures designed to spur investment, support small businesses, and adjust certain revenue-raising provisions. The following sections introduce the major components of this sweeping proposal.

Permanent U.S. Business Tax Reform

The core reforms of the "One Big Beautiful Bill Act" (OBBBA) to the general business tax code focus on altering how companies deduct investments, handle interest expenses, and claim various credits. These provisions are designed to lower the cost of capital and encourage domestic investment in assets, research, and workforce.

(1)

Cost recovery for tangible property

A cornerstone of the bill is the revision of rules governing how businesses recover the cost of their investments in tangible property, such as machinery, vehicles, and buildings. The proposals make temporary expensing provisions permanent and introduce new incentives for specific types of property, fundamentally shifting from a system of multi-year depreciation toward immediate deductibility for many assets.

Methods of cost recovery	OBBBA	TJCA
Bonus depreciation	100% bonus depreciation for property acquired and placed in service after Jan 19, 2024. (a) Bonus depreciation generally applies to property with a recovery period of 20 years or less. (b) The first-year passenger automobile limit is increased by $8,000 for qualified property eligible for bonus depreciation (do not apply to vehicles weighing more than 6,000 pounds) Note: Section 179-> Bonus depreciation-> MACRS. Ref.: Sec.70301. Full Expensing for Certain Business Property	Year		Percentage
		Sep. 28,2017-Dec. 31,2022		100%
		2023		80%
		2024		60%
		2025		40%
		2026		20%
		2027		0%
Section 179	Increases Section 179 expense to $2,500,000 and the property threshold to $4,000,000 for tax years beginning after Dec 31, 2024 (inflation adjusted after Dec 31, 2025). No change to SUV limit. (a) Section 179 property includes tangible property and computer software classified as Section 1245 property. (b) Section 179 property also includes qualified real property, and qualified improvement property (i.e. roofs, fire protection and alarm system, security system). Note1: Section 179 deduction is limited to taxpayer’s active business income and the excess is carried over. Note2: If business use falls to 50% or less in a later year, the taxpayer must recapture the benefit. Ref.: Sec. 70306. Increased Dollar Limitations for Expensing of certain Depreciable Business Assets	Section 179	OBBBA 2025		TCJA 2025
		Expense Limit	$2,500,000		$1,250,000
		Property Limit	$4,000,000		$3,130,000
		SUV Limit	$31,300		$31,300

(2)

Full expensing of domestic Research & Education expenditures

OBBBA makes permanent the increased standard deduction created by TCJA.

The following is a comparison among different proposals:

Categories of R&E expenditures

OBBBA

Domestic

Allows immediate deduction for tax years beginning after 2024.

(a) Not apply to purchases of land or depreciable/depletable property.

(b) Not apply to natural resource exploration costs.

Immediate deduction in 2025 is a change in accounting method, initiated by taxpayers and automatic consent from IRS.

A taxpayer may elect to capitalize and amortize these costs ratably over a period of at least 60 months.

Small businesses ($31 million or less average gross receipts for three previous years) may apply deduction retroactively to tax years beginning after Dec 31, 2021, election must be made within one year of enactment of the OBBBA.

All taxpayers with R&E expenses after 2021 and before 2025 may

deduct remaining expenses over a 1- or 2-year period.

Foreign

Still amortize over 15 years.

(3)

Modification of limitation on business interest (Form 8990).

OBBBA

TCJA

Reinstates EBITDA limitation for tax years beginning after Dec 31, 2024. However, if a small business under the 31 million then those limitations don't apply.

Includes trailers and campers in the “motor vehicle” definition for the floor plan financing exception.

The components of the limitation remain the same:

(a) Business interest income

(b) 30% of adjusted taxable income (EBITDA)

EBIT applied for tax years beginning after Dec 31, 2021.

(4)

Extension and enhancement of PFL&PML credit (Form 8994)

Permanently extends the credit.

(a) Allows credit to be claimed for premiums paid for insurance policies providing paid family leave for employees.
(b) Employer elects to claim credit based on wages or premiums paid.
(c) Employers within the same controlled group are treated as a single employer for purposes of the credit

(5)

Exceptions from limitation on deduction for business meals

OBBBA	TCJA
Allows 100% deduction for meals provided at the convenience of the employer if the expenses relate to good and services sold for adequate and full consideration, effective beginning after Dec 31, 2025.	Meals provided to employees at the convenience of the employer are generally 50% deductible.

(6)

Enhancement of advanced manufacturing investment credit.

(a) Increases Section 48D credit rate from 25% to 35% for property placed in service after Dec 31, 2025. Construction must begin before December 31, 2026.
(b) Applies to investments in semiconductor facilities.

(7)

Enhancement of Employer-Provided Child Care Credit (Form 8882)

Increases credit percentage from 25% to 40% (50% for eligible small business) for amounts paid or incurred after Dec 31, 2025. An “eligible small business” means meeting the gross receipts $31 million test under IRC Section 448(c) for the previous five years (rather than three years).

Increases maximum credit from $150,000 to $500,000 ($600,000 for eligible small business), adjusted for inflation starting in 2027.

Qualified childcare expenditures are expanded to include amounts paid to outside vendors to provide childcare services.

Qualified childcare facilities are expanded to include facilities that are jointly owned or operated by the taxpayer and other parties.

Permanent investments in small businesses and rural America

This section focuses on targeted provisions aimed at fostering growth and providing relief for small businesses and specific rural and agricultural sectors. The measures range from expanding tax benefits for investors to reducing reporting burdens and providing specialized deductions.

Provisions	OBBBA
Sec. 70431. Expansion of Qualified Small Business Stock Gain Exclusion	(a) Increases maximum gain eligible for Section 1202 treatment from $10 million to $15 million, indexed for inflation starting in 2027. (b) Increases gross assets threshold from $50 million to $75 million, indexed for inflation starting in 2027 (c) Qualified small business stock is stock in a domestic C corporation. (d) Gross assets cannot exceed $75 million at any time before the stock is issued. (e) The shareholder must have acquired the stock as an original issuance. (f) C corporations are ineligible shareholders. (g) 80% of the assets based on value are used in the active conduct of 1 or more qualified businesses. (h) The following businesses do not qualify: Specified service businesses, such as law and accounting; Financial services; Natural resource production. (i) Gains from the sale of Section 1202 stock are reported on Form 8949. (j) Section 1202 gains are taxed at a maximum rate of 28%. (k) Gains in excess of the maximum exclusion are not Section 1202 gains and are taxed at the long-term capital gain rates of 0%, 15%, and 20%.
Sec. 70432. Repeal of Revision to De Minimis Rules for Third Party Network Transactions	Changes Form 1099-K requirement for third-party settlement organizations to $20,000 on more than 200 transactions, applies retroactively to calendar years beginning after Dec 31, 2021.
Sec. 70433. Increase in Threshold for Requiring Information Reporting with Respect to Payees	Increases Forms 1099-NEC and 1099-MISC filing threshold to $2,000 for tax years beginning after Dec 31, 2025.
Sec. 70438. Extension of Rules for Treatment of Certain Disaster- Related Personal Casualty Losses	(a) Not subject to the 10% of AGI casualty loss limitation. (b) Subject to a $500 floor instead of $100. (c) Deductible in addition to the standard deduction. (d) Personal casualty losses arising in a qualified disaster area are eligible for the enhanced relief if a major disaster is declared up until 60 days after the enactment of the OBBBA.
Sec. 70434. Treatment of Certain Qualified Sound Recording Productions	(a) Adds “Qualified Sound Recording Productions” to IRC Section 181. (b) Allow immediate expensing up to $150,000 for sound recordings. (c) Eligible for bonus depreciation. (d) Effective after enactment of the OBBBA.
Sec. 70435. Exclusion of Interest on Loans Secured by Rural or Agricultural Real Property	25% interest income exclusion for qualified real estate loans. Effective for loans made after the date of enactment.
Sec. 70436. Reduction of Transfer and Manufacturing Taxes for Certain Devices	$200 transfer tax under IRC Section 5811(a) for a machine gun or a destructive device. $0 for other firearms.
Sec. 70437. Treatment of Capital Gains from the Sale of Certain Farmland Property	A qualified farmer may elect to pay the tax from the sale of qualified farmland in 4 equal installments.
Sec. 70439. Restoration of Taxable REIT Subsidiary Asset Test (Form 8875)	Increases the limitation for REIT assets owned by subsidiaries to 25% (up from 20%) for tax years beginning after Dec 31, 2025.

Modification of Limitation on Business Interest (Form 8990)

This section includes measures designed to offset the cost of the bill's incentives and strengthen certain tax compliance rules. It primarily affects large educational endowments, high-compensation employees, and specific financial transactions.

(1)

Modification of Excise Tax on Investment Income of Certain Private Colleges and Universities

The provision will affect large private universities and colleges with significant endowments and investment income/capital gains. The amendments will be effect after Dec31, 2025.

Student-Adjusted Endowment	Excise Tax Rate
$500,000-$749,999	1.4%
$750,000-$1,999,999	4%
$2,000,000+	8%

(2)

Expanding Application of Tax on Excess Compensation within Tax-Exempt Organizations

Expands definition of “covered employee” to include all employees, effective for tax years beginning after Dec 31, 2025.

Enhancing deduction and income tax credit guardrails

OBBBA introduces or makes permanent limitations on certain deductions and strengthens eligibility requirements for tax credits, aiming to ensure that tax benefits are used as intended and to raise additional revenue.

Provisions	Content
Sec. 70601. Modification and Extension of Limitation on Excess Business Losses of Noncorporate Taxpayers	(a) Makes the limitation permanent instead of expiring on Dec 31, 2028. (b) Disallowed losses carryover as NOLs. (c) $313,000 ($626,000 for joint returns) in 2025.
Sec. 70603. Excessive Employee Remuneration from Controlled Group Members and Allocation of Deduction	(a) Adds an entity aggregation rule for purposes of the $1 million office compensation limitation for publicly traded companies. (b) Applies to the CEO, the CFO, and three other highest compensated officers. (c) Effective after Dec 31, 2025.
Sec. 70604. Excise Tax on Remittance Transfers	Imposes a 1% tax on remittance transfers made after 2025.
Sec. 70606. Social Security Number Requirement for American Opportunity and Lifetime Learning Credits	(a) SSN is required for taxpayers and dependent students. (b) Effective after Dec 31, 2025.

Reference:
https://www.congress.gov/bill/119th-congress/house-bill/1/text
https://www.congress.gov/crs-product/R48613

Disclaimer

All information in this article is only for the purpose of information sharing, instead of professional suggestion. Kaizen will not assume any responsibility for loss or damage.

If you wish to obtain more information or assistance, please visit the official website of Kaizen CPA Limited at www.kaizencpa.com or contact us through the following and talk to our professionals:
Email: info@kaizencpa.com
Tel: +852 2341 1444
Mobile : +852 5616 4140, +86 152 1943 4614
WhatsApp/ Line/ WeChat: +852 5616 4140
Skype: kaizencpa

KNOWLEDGE

Hot Labels

SHARE

The One Big Beautiful Bill for U.S Business Tax

Related Articles