The One Big Beautiful Bill Act—or the OBBBA for short—was signed into law in early July, implementing several significant tax law changes. The act’s provisions will have impacts on businesses across a wide range of industries. Here is a list of tax law changes and updates under the OBBBA that manufacturers should be aware of.
100% Bonus Depreciation Restored
The OBBBA permanently restores 100% bonus depreciation for qualified property placed in service as of January 19, 2025, reversing the planned phase-down of this provision. This change will benefit manufacturing firms investing in new equipment or machinery, allowing these purchases to be written off immediately.
Depreciation for Qualified Production Property
The OBBBA also introduces an elective first-year 100% depreciation deduction for “qualified production property,” that is, nonresidential real property used in manufacturing or production activities.
Increased Section 179 Deduction
The Section 179 deduction allows businesses to deduct the full cost of qualifying equipment in the year it is placed into service. The OBBBA increases the Section 179 expensing limit to $2.5 million, reduced by the amount by which the cost of qualifying property exceeds $4 million (new phasedown threshold).
Immediate R&D Deductions Restored
U.S. research and development expenditures, previously required to be amortized over five years, can now be deducted in the year paid. Small businesses averaging $31 million or less in annual gross receipts may elect to apply the change retroactively for tax years beginning after December 31, 2021. All businesses that made domestic R&D expenditures between 2022 and 2024 may elect to accelerate the remaining deductions for those expenditures over one or two years. Unlike domestic expenditures, foreign R&D costs continue to require a 15‑year amortization under Section 174.
Manufacturing firms planning to innovate their processes, explore new technologies, and develop new products stand to benefit from this provision.
Limitation on Business Interest
The OBBBA reinstates the EBITDA (Earnings Before Interest, Taxes, Depreciation and Amortization) limitation under Sec. 163(j), effective for tax years beginning after December 31, 2024. Adjusted taxable income (ATI) will be computed without regard to the deduction for depreciation, amortization, or depletion.
QBI Deduction Extended
The OBBBA permanently extends the Qualified Business Income (QBI) deduction, which allows eligible taxpayers to deduct up to 20% of their qualified business income. The permanent extension includes additional modifications that expand the phase-in range of the wage and investment limitation and introduce a minimum deduction for businesses in which the taxpayer materially participates.
Changes to Clean Energy Incentives
The OBBBA terminates, phases out, or curtails many clean energy tax incentives, including the Section 179D energy-efficient commercial buildings deduction, the Section 48E clean electricity investment credit, the Section 45Y clean electricity production credit, and certain credits for wind and solar projects. On the other hand, the bill extends the Section 45Z clean fuel production credit through 2029.
Advanced Manufacturing Investment Credit (AMIC) Increased
The Advanced Manufacturing Investment Credit is a tax credit available to manufacturers of semiconductors and semiconductor manufacturing equipment for eligible investments. The OBBBA increases the AMIC rate from 25% to 35%.
International Tax Provisions
Significant adjustments have been made to international tax provisions, including the following changes. The deduction rates for foreign-derived intangible income (FDII) and global intangible low-taxed income (GILTI) have been updated starting after 2025. The OBBBA also renames the FDII to FDDEI (foreign-derived deduction eligible income) and the GILTI to NCTI (net CFC tested income). The FDII (now FDDEI) deduction rate is reduced to 33.34% and the GILTI (now NCTI) deduction rate is lowered to 40%. Additionally, the Base Erosion and Anti-abuse Tax (BEAT) minimum tax rate will be permanently set at 10.5% (previously scheduled to rise to 12.5% after 2025).
Outlook for Manufacturers
In general, the changes under the One Big Beautiful Bill Act are favorable for many manufacturing companies, extending many key tax incentives and supporting domestic growth. RBT CPAs will continue to provide clients with updated information as IRS guidance on the OBBBA is released. Meanwhile, if you have any questions about how the recent tax law changes may affect your business strategy, please don’t hesitate to reach out to our manufacturing accounting professionals at RBT CPAs. Our team is here to support all of your tax, audit, accounting, and advisory needs. Give us a call today to find out how we can be Remarkably Better Together.