President Trump’s One Big Beautiful Bill Act, signed on July 4, delivers one of the most aggressive supply-side tax provisions in recent history. The legislation revives full expensing for research and development, expands interest deductibility, makes key small-business tax breaks permanent, and introduces individual income tax deductions aimed at shifting workforce expectations and sentiment in the service sector.
For CFOs, the law brings immediate reporting impacts, complex balance sheet adjustments and compensation-related planning challenges that may play out in Q3 and beyond. As Joseph Perry, national tax leader at CBIZ, put it in an interview with CFO.com, “We are still unpacking the recently enacted law to identify further opportunities and how to navigate some of the pitfalls.”
The bottom line for CFOs appears to be that most should prioritize Q3 reporting and tax forecasting now, before surprises start showing up in year-end close.
1. R&D expensing is back, but may distort Q3 earnings
The law reinstates immediate expensing of U.S.-based R&D costs, reversing a 2022 change that required amortization over five years. However, foreign R&D remains subject to a 15-year amortization schedule.
Perry noted several public companies, including Microsoft, Amazon and Google, had previously reported earnings impacts when the amortization rule first took effect. With expensing now restored, the change could improve earnings. However, Perry notes timing matters here.
“From a GAAP standpoint, any effect related to an enacted law will be included in the period of enactment,” Perry said. “That would be the third quarter for most companies.” He added that “further consideration should be given to any impact that may give rise to a subsequent event disclosure.”
2. Tax-deferred assets may need to be reassessed
Several provisions in the new law, including the return of full R&D expensing and changes to interest deductibility, could affect how tax-deferred assets are reflected on the balance sheet.
“One of the most critical aspects for public company CFOs is to understand the effect on go-forward earnings as well as on the tax deferred assets on the balance sheet,” Perry said.
The restoration of full expensing for R&D, which reverses the five-year amortization requirement enacted in 2022, directly affects deferred tax assets tied to those expenses. According to KPMG, under GAAP and ASC 740, changes in enacted tax law that affect the timing of deductions must be recognized in the period of enactment — for most calendar-year companies, that will be the third quarter. This means DTAs associated with previously capitalized or amortized R&D will need to be reassessed and potentially adjusted.
3. Interest deductibility rules have shifted
One provision with broad applicability is the change to the interest deduction limitation under IRS Section 163(j). Companies may now calculate the limit without subtracting depreciation, amortization or depletion.
“This could reduce the tax burden by increasing your interest deduction,” said Perry. “Further, this may result in a change in the valuation reserve on your balance sheet related to the non-deductible portion of your interest, which would be a positive result.”
CFOs may want to review how the new calculation affects existing tax positions. According to the KPMG report on accounting for the law, changes in tax legislation that impact deferred tax balances or valuation allowances must be accounted for in the period of enactment. This could require adjustments during Q3 for calendar-year filers.
4. Key small-business tax incentives are now permanent
Two long-standing tax breaks for private companies — the Qualified Small Business Stock exclusion under Section 1202 and the 20% Qualified Business Income deduction for pass-through entities — are now permanent under the new law.
“Section 1202 stock (Qualified Small Business Exclusion) was expanded and made permanent for private companies,” Perry said. “For pass-through entities, the 20% Qualified Business Income Deduction was made permanent.”
The permanence provides long-term planning certainty for owners and CFOs at founder-led, investor-backed or family-owned businesses.
5. Bonus depreciation and Section 179 expensing return
Likely to further stimulate business spending, the law reinstates 100% bonus depreciation and enhances Section 179 expensing. These provisions allow businesses to immediately deduct qualifying capital purchases instead of depreciating them over time.
Perry noted these as among “a few other business-friendly aspects to consider,” alongside the repeal of the scheduled increase in the Base Erosion and Anti-Abuse tax.
According to KPMG, the restoration of full expensing may result in “material changes to the measurement of deferred tax balances” and will require companies to “evaluate the timing and magnitude of deductions taken for newly acquired assets.” CFOs may want to review whether updates to fixed asset planning, tax provisioning or forecasts are needed in light of the changes and their effective date.
6. Compensation deduction limits tightened for public companies
On the less favorable side for public companies and their CFOs, the new law tightens restrictions on the deductibility of executive compensation by expanding the scope of aggregation. Though soaring CFO compensation may seem like an obvious positive for finance chiefs, it could contribute to breaching the $1 million deductibility cap. This can cause a larger portion of compensation across the C-suite to no longer be tax-deductible.
“The limitation on the deductibility of compensation over $1 million for public companies now must be aggregated within a controlled group,” Perry said. “This may result in further limitations on the deductibility of compensation.”
The KPMG report confirms companies may need to reevaluate existing arrangements, noting the change will require businesses to reassess both compensation structures and related disclosures under the expanded Section 162(m) rules.
7. ERC claim restrictions could affect cash positions
The bill includes a retroactive change that eliminates the ability to receive the pandemic era Employee Retention Credit payments for the third and fourth quarters of 2021, if the claim was filed after Jan. 31, 2024.
“Another real stinger hits companies that have not yet received the ERC,” Perry said. “The law prohibits the payment of claims filed for the third and fourth quarters of 2021 as of January 31, 2024. In short, if you have already received and cashed your check, you are in luck. However, if you didn’t, don’t expect one. It seems very unfair, but it is what the law states.”
8. Tax relief for tipped and hourly workers may influence compensation strategy
While corporate tax changes take center stage, the bill also includes temporary individual tax deductions that could reshape how employees view their net compensation. Starting in 2025, workers will be able to deduct up to $25,000 in tipped income and up to $12,500 in overtime pay.
“Many of the provisions are in line with President Trump’s communicated agenda, including no tax on certain tips and overtime pay,” Perry said.
In practice, many tipped workers either don’t report all cash tips or earn too little to owe significant federal income tax, meaning this provision is unlikely to lower their actual tax liability. Instead, it effectively front-loads their refund, decreasing the amount returned at filing time rather than creating new tax savings.
Still, CFOs in hospitality, food service and other hourly industries may need to adjust how they communicate take-home pay and total rewards. Even modest changes to tax-adjusted earnings can shift employee expectations around competitiveness and retention.
9. SALT deduction cap raised temporarily for high-tax states
The bill also adjusts the state and local tax (SALT) deduction, which allows taxpayers to deduct state and local income and property taxes on their federal returns. The current $10,000 limit, imposed under the 2017 tax law, will rise to $40,000 starting in 2025 for households earning up to $500,000.
The expanded deduction begins to phase out above that threshold and is scheduled to gradually return to the original $10,000 cap by 2030, with modest annual increases along the way.
While this doesn’t directly affect corporate tax filings, CFOs at companies based in high-tax states may want to consider how the SALT change affects employee take-home pay, executive relocation considerations or geographic compensation strategy.
Editor’s note: This story has been updated to clarify that the reinstated immediate expensing of research and development applies to U.S.-based R&D.
