Current vs. Final: Decoding the Tax Shifts in the OBBB Act
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- On July 8, 2025
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House Approves OBBBA Final Version; Now Heads to President’s Desk for Signature
The One Big Beautiful Bill Crosses the Finish Line
- After months of negotiation, multiple rewrites, and intense floor debates, the U.S. House of Representatives has officially passed the final version of the One Big Beautiful Bill Act (OBBBA), marking a significant milestone in one of the year’s most closely watched legislative efforts.
- The 218–214 vote in the House sends the 869-page One Big Beautiful Bill to President Donald Trump’s desk for signing on Friday, July 4, aligning symbolically with Independence Day.
- The vote came after a week of intense political back-and-forth, closed-door negotiations, and passionate floor debates. While the bill ultimately garnered enough support, members of the opposition delivered extended speeches criticizing its scope and global tax implications.
- Still, the bill’s passage marks a major legislative win. On Truth Social, Trump called the bill the start of a “new Golden Age” and announced a “Signing Celebration” at the White House.
Excise Remittance Tax @1% : Targeting Outbound Payments
- The original version of the One Big Beautiful Bill Act (OBBBA), introduced in the House in early 2025, proposed a 5% flat excise tax on all outbound remittances sent by non-U.S. citizens and non-nationals.
- Due to concerns about undue burden on immigrant communities sending money abroad, it was later amended to 3.5%. However, the scope remained broad, meaning all transfer methods were still taxable.
Now, the new law OBBBA establishes a 1% collected federal excise tax on certain electronic transfers of money sent from within the U.S. to a foreign country.
The provision includes new reporting obligations (IRC 6050BB) and is set to apply to transfers made after December 31, 2025
Bank and card-based transfers are now carved out, i.e., no tax applies if the remittance is:
- Sent from a U.S. bank account, or
- Made using a U.S.-issued debit or credit card.
Individuals with Social Security Numbers (SSNs) may claim a refundable credit.
BONUS and Special Depreciation
Current Law
- Bonus depreciation: under IRC section 168(k) is phasing down: 60% in 2024, 40% in 2025, 20% in 2026, and eliminated thereafter.
- IRC section 179: limited to ~$1M with $2.5M phaseout
- Special Depreciation: In general, nonresidential real property is depreciated over a 39-year period
New Law OBBBA
- Makes IRC section 168(k) permanent: 100% bonus depreciation for assets and specified plants placed in service or planted on/after Jan 19, 2025.
- Increases IRC section 179 expensing limits to $2.5 million (from $1 million), with a phase-out threshold of $4 million (from $2.5 million), indexed for inflation
- This provision allows taxpayers an additional first-year depreciation deduction equal to 100% of the adjusted basis of qualified production property in service before January 1, 2031.
Business Interest Deduction Limitation
Current Law
The deduction for business interest expense is limited to 30% of adjusted taxable income (ATI), with ATI calculated after depreciation, amortization, and depletion deductions (i.e., a more restrictive base since 2022).
ATI was based on EBIT
(Earnings before Interest and Tax)
New Law OBBBA
Permanently reinstates the EBITDA limitation for the calculation of the deduction after December 31, 2024.
- IRC section 163(j) limitation is calculated before applying any interest capitalization rules.
- Interest capitalized under IRC section 263(g) or IRC section 263A(f) is not treated as “business interest” under IRC section 163(j).
- Excludes Subpart F income, GILTI, and IRC section 78 gross-up from Adjusted Taxable Income (ATI) for IRC section 163(j) purposes.
Research And Development
Current Law
Beginning in 2022, IRC section 174 requires capitalization and amortization of domestic R&D expenditures over 5 years (15 years for foreign R&D).
Immediate expensing of R&D costs is not allowed
New Law OBBBA
- Allows immediate deduction of domestic R&E expenses paid or incurred in taxable years beginning after December 31, 2024..
- Foreign R&E expenses must continue to be amortized over 15 years
- Retroactive Relief for Small Businesses: Taxpayers with average annual gross receipts of $31 million or less may apply the new rule retroactively for tax years beginning after December 31, 2021
- Acceleration Election: Taxpayers may elect to accelerate remaining amortized deductions for domestic R&E expenditures made between 2022–2024 over a 1-year or 2-year period.
- Allows an election to amortize domestic R&D over at least 60 months.
International Tax Reforms
Terminology Update
- “FDII” : renamed as Foreign-Derived Deduction Eligible Income (FDDEI)
- “GILTI” : renamed as Net CFC Tested Income (NCTI)
Particulars |
Current Law |
New Law OBBBA |
|
Rates under Current law (TCJA) |
Scheduled Rates for 2026 |
||
| GILTI: Global Intangible Low Taxed Income | 50% deduction, resulting in a 10.5% effective corporate tax rate |
Deduction to be dropped to 37.5% | Deduction to be set at 40%, resulting in a 12.6% effective corporate tax rate |
| FDII : Foreign Direct Intangible Income | 37.5% deduction, resulting in a 13.125% effective tax rate |
Deduction to be dropped to 21.875% | Deduction to be set at 33.34%, resulting in a 14% effective tax rate. |
| BEAT : Base Erosion and Anti-Abuse Tax | 10% rate through 2025 | Increasing to 12.5% in 2026 | 1.Rate to be set at 10.5 % |
International Tax Reforms: FTC
Provision |
Current Law |
New Law OBBBA |
| Allocation of Deductions to GILTI / Net CFC Tested Income | For FTC limitation purposes, deductions are allocated /apportioned based on their relation to gross income.
Many expenses (interest, stewardship, R&D) are apportioned across income categories, including GILTI. |
Limits allowable deductions allocable to GILTI to:
All other deductions are reallocated to U.S.-source income. |
| Deemed Paid FTC for Taxes Attributable to Tested Income | Domestic corporations deemed to have paid 80% of foreign income taxes attributable to CFC tested income (under IRC section 960(d)(1)). This reduces their U.S. residual tax on GILTI. | Increases the deemed paid tax credit from 80% to 90%, increasing the amount of foreign taxes that can be credited against GILTI inclusions. |
| Sourcing Rule for U.S.-Produced Inventory Sold Abroad | Income from U.S.-produced inventory sold outside the U.S. is generally 100% U.S.-source, even if the sale involves a foreign office or branch.
This limits foreign tax credit availability. |
For FTC limitation purposes only, income from such inventory can be treated as foreign-source income (up to 50% of the total income) if:
|
Expansion of QSBS Exclusion
Topic |
Current Law |
New Law OBBBA |
| Tiered Gain Exclusion |
|
(applies only to QSBS issued after enactment)
|
| Per‑Issuer Limit | The aggregate amount of “eligible gain” that can be excluded is subject to per-issuer per year cap which is greater of:
|
The aggregate amount of “eligible gain” per year that can be excluded proposed to be greater of:
|
| Aggregate Gross Asset Threshold | Limits eligibility for QSBS treatment to corporations whose total assets have never exceeded $50 million at any time from incorporation through the moment just after the stock is issued. | The aggregate gross asset threshold would be increased to $75 million, with annual inflation adjustments. |
Revenge Tax (IRC Section 899): Cancelled, for Now
- Proposed under Section 899 of the OBBBA draft, this measure sought to impose retaliatory tax penalties on companies from discriminatory countries that levy “unfair taxes”.
- Often referred to as the “revenge tax,” it was intended to mirror or penalize foreign jurisdictions for taxing U.S. digital and tech companies abroad.
- The Senate proposed Section 899 sought to impose a 5%–15% extra tax on entities with ties to such discriminatory countries, while also broadening the scope of the Base Erosion and Anti-Abuse Tax (BEAT) under IRC Section 59A.
- The provision faced strong pushback from G7 nations and the U.S. Treasury, which warned it could undermine OECD tax agreements and violate global trade norms.
- Now, OBBBA’s punitive “revenge tax” provision targeting countries imposing digital services or UTPR taxes has been officially removed from the finally enacted One Big Beautifull Bill Act.
Other important Provisions
- IRC Section 461(l) Excess Business Losses Made Permanent: Keeps the current cap, which is set to expire after 2028; Finance Committee removal proposal dropped.
- Make permanent the CFC “Look-Through” Rule.
- Make the Section 199A pass-through deduction permanent, raise the phase-in threshold by $50,000 for single filers and $100,000 for joint filers, and establish a minimum deduction of $400 for taxpayers with at least $1,000 in qualified business income (QBI) who are material participants.
- Large-Scale Phase Out of Renewables Credits: Eliminates federal wind and solar tax credits after 2027 (100% credit only for projects beginning before the end of 2025, phasing down by 2028); retains credits for hydro, nuclear, and geothermal.
- New Tax on Projects with Chinese Components: Imposes new tax on wind and solar projects using Chinese-made parts after Dec 31, 2027.
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