One Big Beautiful Bill Act:  Business Tax Provisions

One Big Beautiful Bill Act: Business Tax Provisions

Article Summary

• Key changes to business tax rules: The Act includes a set of updated and newly permanent business tax provisions affecting deductions, reporting thresholds, and credits for various types of businesses.
• Qualified Business Income deduction: The 20% pass-through business income deduction under Section 199A is now permanently extended.
• Interest, reporting, and meals: There are revisions to the Section 163(j) business interest limitation, an increased threshold for 1099 reporting, and changes to how deductible business meals are treated.
• Other business-related provisions: The Act addresses energy-efficient building deductions (with an expiration scheduled for 2026), updates to the Employee Retention Credit, expanded benefits for Qualified Small Business Stock (Section 1202), and new rules for domestic research and experimentation deductions.
• Overall impact: These provisions are aimed at simplifying tax compliance for businesses, making certain deductions permanent, and adjusting limitations or benefits that were previously set to expire or change.

With the passage of the One Big Beautiful Bill Act, which was signed into law by President Trump on July 4, many provisions within the tax code have changed. Below are summaries of key tax provisions we believe will be of most interest to you and your business. 

Permanent Extension of the Section 199A Qualified Business Income Deduction

The Section 199A deduction, also known as the Qualified Business Income (QBI) deduction, was originally enacted as part of the 2017 Tax Cuts and Jobs Act (TCJA). It allows non-corporate owners of pass-through entities – including sole proprietorships, partnerships, S-corporations – to deduct up to 20% of their qualified business income, subject to various thresholds and limitations. According to IRS data, more than 90% of U.S. businesses are structured as pass-through entities, making this deduction particularly valuable.

Originally set to expire at the end of 2025 alongside other TCJA provisions, the QBI deduction has now been permanently extended under the newly enacted One Big Beautiful Bill Act (OBBBA). In addition to making the deduction permanent, the OBBBA introduces an inflation-adjusted minimum deduction, ensuring that eligible taxpayers receive at least a baseline benefit each year.

The table below summarizes the key features of the QBI deduction as extended and enhanced under the OBBBA.

Changes to the Section 163(j) Business Interest Limitation Under the One Big Beautiful Bill Act (OBBBA)

Section 163(j) of the Internal Revenue Code, introduced as part of the Tax Cuts and Jobs Act (TCJA) of 2017, places limits on the deductibility of business interest expense. The purpose of this provision is to prevent excessive use of debt to finance business operations, which can erode the tax base and encourage risky financial behavior. At a high level, Section 163(j) limits the amount of business interest a taxpayer can deduct in a tax year to the sum of (1) business interest income, (2) 30% of adjusted taxable income (ATI), and (3) any floor plan financing interest.

During its effective period, the TCJA provided two different methods for calculating ATI: one applicable to tax years 2018-2021, and a more restrictive method applicable to tax years 2022-2024. The starting point for both methods was a company’s taxable income, which was then modified by adding back certain items as outlined in the table below.

For tax years 2018-2021, the calculation effectively followed an EBITDA-based approach, as depreciation, amortization, and depletion were added back to taxable income when computing ATI. Beginning in 2022, these add-backs expired, resulting in an EBIT-based calculation that further limited the amount of deductible interest expense.

Beginning in tax year 2025, the One Big Beautiful Bill Act (OBBBA) modifies the ATI calculation by reinstating the add-back for depreciation, amortization, and depletion. This change returns the calculation to an EBITDA-based approach, increasing the base against which the business interest deduction limitation is applied. As a result, many companies will be able to deduct significantly more interest expense than they would have under the EBIT-based calculation that would have applied without the enactment of the OBBBA.

A simple example is provided below to illustrate the impact of the new provision. The example assumes no net operating loss deductions or section 199A deductions for simplicity.

It is worth noting that disallowed interest expense in any given year can be carried forward indefinitely. Additionally, beginning in tax year 2025, the 163(j) limitation applies only to companies whose average gross receipts over the previous three tax years exceed $31 million.

OBBBA and the New Information Reporting (1099) Thresholds

The One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, includes a significant change to the information return reporting threshold for business payments. This change directly affects when businesses must file Form 1099-NEC and Form 1099-MISC for payments made to service providers and vendors.

Under prior law, businesses were required to file information returns for payments totaling $600 or more in a calendar year for certain payments made. This threshold had been in place for decades and was not indexed for inflation.

The OBBBA raises this threshold significantly and introduces inflation indexing, reducing the compliance burden for small businesses and aligning reporting requirements with modern economic realities.

OBBBA Changes to Deductible Meals

The One Big Beautiful Bill Act (OBBBA) was signed into law on July 4, 2025. One of the provisions of this new law pertains to the tax deductibility of certain business meals. This new provision does not change the deductibility of all business meals but only for employer-provided meals that met specific criteria. Here are the details of what was allowed prior to the changes in the OBBBA:

Deductible Employer-Provided Meals Criteria for Deductibility

1. Business Premises Requirement:

• The meals had to be provided on the employer’s business premises. This includes meals served in an employer-operated cafeteria or other eating facility on the premises.

1. Employee Convenience:

• The meals needed to be provided for the convenience of the employer. This means the primary reason for providing the meals was to benefit the employer, such as ensuring employees remain on the premises during meal periods to be available for emergencies or to meet specific work demands.

1. Substantiation:

• Employers had to substantiate the meal expenses adequately. This includes maintaining records that demonstrate the business purpose of the meals and the number of employees served.

Specific Conditions and Examples

1. Overtime Meals:

• Meals provided to employees working overtime were deductible if they were necessary to allow the employees to continue working through their meal period.
• Example: A company provides dinner to employees working late to complete a critical project.

1. Meals During Business Meetings:

• Meals provided during business meetings on the premises were deductible if the meetings were primarily for the discussion of business.
• Example: Lunch provided during a staff meeting to discuss quarterly performance.

1. Meals for Employees on Call:

• Meals provided to employees who had to be on call during their meal period were deductible.
• Example: Hospital staff are provided with meals so they can remain on-site and available for emergencies.

Non-Deductible Expenses

• The cost of operating the eating facility, such as the salaries of employees preparing and serving meals and other overhead expenses, was not deductible.
• Meals provided to employees for personal reasons or as a form of additional compensation were generally not deductible.

OBBBA Post-2025 Changes

• After December 31, 2025, the deduction for employer-provided meals will be disallowed, except for certain meals provided on vessels, oil or gas platforms, drilling rigs, and support camps.

***Every other provision regarding the deductibility of business meals remains unchanged and are as follows:***

A taxpayer can generally deduct 50% of business meal expenses if they meet the following conditions:

• The expenses are ordinary and necessary for carrying on a trade or business.
• The taxpayer or their employee is present at the meal.
• The food or beverage is not lavish or extravagant.
• The meal is provided to current or potential clients or business contacts.
• Food and beverages provided during entertainment must be purchased or invoiced separately.

Travel expenses, including meals and lodging, are deductible if they are incurred while away from home in the pursuit of a trade or business. These expenses must be reasonable and necessary.

Several exceptions allow for full deduction of meal expenses:

• Expenses Treated as Compensation: If meal expenses are treated as compensation to the recipient and included in wages, the employer can deduct it as wages.
• Reimbursed Expenses: When expenses are reimbursed under an accountable plan.
• Employee Recreational and Social Activities: Expenses for activities primarily benefiting non-highly compensated employees (i.e. Company parties).
• Goods and Services Available to the Public: Expenses for meals made available to the general public.
• Meals Sold to Customers: Expenses for meals sold to customers in a bona fide transaction.

Please ensure that all meal expenses are documented and substantiated according to these guidelines to maintain compliance with IRS regulations. 

Energy-Efficient Building Deduction Set to Expire in 2026

Under the One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, a longstanding federal tax deduction for energy-efficient commercial construction is being phased out. Section 179D of the Internal Revenue Code – which allows building owners and certain construction-related service providers to claim a tax deduction for energy-saving improvements – will be permanently repealed. Projects that begin construction after June 30, 2026, will no longer be eligible.

Section 179D has provided a deduction of up to $5.81 per square foot for commercial buildings that incorporate qualifying energy-saving systems – such as high-efficiency HVAC, lighting, and water heating technologies. The provision was designed to encourage energy-conscious design and help offset the upfront costs of sustainable construction.

The repeal of Section 179D will affect commercial building owners, developers, and the professionals who support energy-efficient construction, including architects, engineers, and design-build contractors who, under prior law, could be allocated a portion of the deduction.

From a tax planning perspective, it’s important to note that while construction must begin before June 30, 2026, the building can be placed in service after that date and still qualify for the 179D deduction. Taxpayers should review prior-year projects to determine whether amended returns could capture missed benefits before this incentive is fully phased out.

What the One Big Beautiful Bill Act Means for the Employee Retention Credit

The Employee Retention Tax Credit (ERTC) was established under the Coronavirus Aid, Relief, and Economic Security Act (the CARES Act) in 2020 as part of the federal response to the COVID-19 pandemic. The credit was designed to help employers cover a portion of their payroll costs and encourage them to retain employees during the pandemic.

Since its enactment, one of the most significant challenges associated with the ERTC has been the rise of aggressive promoters who encouraged businesses to claim the credit – even when they did not qualify. In response, the newly enacted One Big Beautiful Bill Act (OBBBA) includes provisions that (1) retroactively suspend certain pending claims, (2) extend the statute of limitations for auditing claims, and (3) impose enhanced penalties and enforcement measures to address past abuse.

Retroactive Suspension of Certain Claims Filed After January 31, 2024

Effective upon enactment of the OBBBA, certain ERTC claims filed after January 31, 2024, are disallowed – even if the usual statute of limitations would otherwise permit a later filing. The restriction applies to claims made under Section 3134 of the Internal Revenue Code for wages paid in the third and fourth quarters of 2021. Claims for wages paid in 2020 and the first two quarters of 2021 remain unaffected, as do any ERTC refunds already issued.

Extension of Statute of Limitations

The statute of limitations for assessing ERTC Claims related to wages paid in the third and fourth quarters of 2021 has been extended under the OBBBA. Previously, Section 3134 of the Internal Revenue Code provided a five-year limitations period from the date the original return was filed. Under the new law, this period has been extended to six years. As a result, claims for wages paid in the third and fourth quarters of 2021 may now be subject to IRS assessment through April 15, 2028, or six years from the date the claim was filed, whichever is later.

It’s important to note that this extension applies only to claims for the third and fourth quarters of 2021. The statute of limitations for ERTC claims related to wages paid in 2020 and the first two quarters of 2021 remains unchanged. Those deadlines expired on April 15, 2024, and April 15, 2025, respectively.

20% Penalty for Erroneous Refunds

Section 6676 of the Internal Revenue Code imposes a 20% penalty on erroneous refunds of income taxes. Under the OBBBA, this provision has been amended to also apply to erroneous refunds of employment taxes (payroll tax). This change enables the IRS to apply the penalty to ERTC refunds, to which Section 6676 did not previously apply. This potential penalty applies to all ERTC claims, not just those relating to wages paid in the third and fourth quarters of 2021.

COVID-ERTC Promoters and Due Diligence Requirements

The OBBBA introduces the term “COVID-ERTC Promoters,” which is defined as “any person which provides aid, assistance, or advice” regarding an ERTC claim if the person satisfies one of two tests:

First Test: The person receives a fee based on the amount of the ERTC credit or refund, and more than 20% of the person’s gross receipts are attributable to ERTC-related activity.

Second Test: The person’s fee does not need to be based on the ERTC credit or refund, but either of the following must be true:

• More than 50% of the person’s gross receipts are attributable to ERTC-related activity; or
• More than 20% of the person’s gross receipts are attributable to ERTC-related activity, and those receipts exceed $500,000. For this test, aggregation rules under Sections 52 and 414 of the Internal Revenue Code apply.

Individuals or businesses that meet the definition of a COVID-ERTC Promoter under the new law are now subject to due diligence requirements modeled after those in Section 6695(g) of the Internal Revenue Code. These standards require promoters to exercise reasonable care in evaluating an employer’s eligibility for the ERTC and in accurately calculating the amount of the credit. A penalty of $1,000 applies to each failure to meet these due diligence obligations. This enforcement provision addresses a widespread issue during the pandemic, when many ERTC promoters submitted claims with little to no verification of eligibility or accuracy – resulting in significant abuse of the program.

Overall, the ERTC-related provisions in the OBBBA address concerns about how the ERTC was promoted and claimed, with a particular focus on claims relating to the third and fourth quarters of 2021. By targeting questionable promotional practices and creating consequences for erroneous or unsupported claims, the law aims to reinforce the integrity of the credit after the fact.

Expanded Tax Benefits for Qualified Small Business Stock Under Section 1202

Section 1202 of the Internal Revenue Code provides a valuable tax benefit for owners and investors in certain small businesses through the Qualified Small Business Stock (QSBS) exclusion. It allows noncorporate taxpayers to exclude up to 100% of the capital gain from the sale of qualifying stock when held for more than five years. Originally enacted in 1993, Section 1202 has become an important tool for founders, early employees, and investors, offering significant tax savings on business exits.

The One Big Beautiful Bill Act (OBBBA) makes several significant changes to the QSBS rules under Section 1202. The key updates are summarized below.

Gain Exclusion Expanded

The OBBBA introduces a provision allowing noncorporate taxpayers to claim a partial gain exclusion for QSBS held for less than five years, provided the stock is acquired on or after July 4, 2025.

Increased Cap on Gain Exclusion

Section 1202 places a cap on the amount of QSBS gain that may be excluded from taxable income. The OBBBA increases this cap for QSBS acquired on or after July 4, 2025.

Gross Asset Threshold

For stock to qualify as QSBS, the issuing company’s gross assets must fall below certain thresholds immediately before and after the stock is issued, as established under Section 1202. The OBBBA raises this gross asset threshold for stock acquired on or after July 4, 2025.

Other Section 1202 Requirements and Provisions Remain Unchanged

While the OBBBA introduces several important modifications to Section 1202, other key elements remain intact. The following requirements and related provisions continue to apply:

• The stock must be issued by a domestic C-Corporation and acquired at original issuance (not through secondary purchase).
• The corporation must be actively engaged in a qualified trade or business, with at least 80% of its assets used in the active conduct of that business.
• The gain excluded under Section 1202 remains fully excluded for alternative minimum tax (AMT) purposes.

The changes outlined above significantly broaden the reach of Section 1202 by allowing more businesses to qualify as QSBS issuers and by increasing the potential gain exclusion and overall tax benefits available to holders of QSBS.

New Rules for Deducting Domestic Research and Experimentation Expenses

Historically, businesses could immediately deduct research and experimentation (R&E) expenses under Section 174 of the Internal Revenue Code. However, beginning in 2022, the Tax Cuts and Jobs Act (TCJA) required taxpayers to capitalize and amortize these expenses - over five years for domestic R&E expenses and fifteen years for foreign R&E expenses. This change significantly increased compliance burdens and tax liabilities, particularly for startups and small businesses engaged in early-stage research and development.

Section 174 Reform: Immediate Deduction for Domestic R&E

The One Big Beautiful Bill Act (OBBBA) reverses the TCJA’s treatment of domestic R&E expenses. For tax years beginning after December 31, 2024, taxpayers may once again immediately deduct domestic R&E expenses in the year incurred. This change is permanent under the current law. However, the treatment of foreign R&E expenses remains unchanged – those expenses must continue to be capitalized and amortized over fifteen years.

The OBBBA also allows taxpayers to elect to continue capitalizing and amortizing domestic R&E expenses over a five-year period for tax years beginning after December 31, 2024. This election must be made by the due date (including extensions) of the affected tax return.

Implementing the New Law

The OBBBA provides several methods for taxpayers to deduct domestic R&E expenses capitalized during the 2022-2024 tax years.

• Small Business Taxpayers: Businesses with average annual gross receipts of $31 million or less may retroactively elect to apply the new deduction rules to the 2022-2024 tax years. This election must be made by July 4, 2026, and allows eligible taxpayers to file amended returns and claim the deduction for previously capitalized domestic R&E expenses.
• Acceleration Provisions: Taxpayers who did not elect – or were ineligible to elect – to retroactively apply the new deduction rules to prior tax years may instead elect to accelerate the deduction of the unamortized portion of any capitalized domestic R&E expenses over a one- or two-year period, starting with the 2025 tax year.

Absent the two elections discussed above, domestic R&E expenses previously capitalized will continue to be amortized over their original five-year life.

Accounting Method Change

The change from a five-year amortization period to a current deduction for domestic R&E expenses is considered a change in accounting method. However, taxpayers will not be required to file Form 3115, as the change is treated as “initiated by taxpayer” and “as made with the consent of” the IRS.

100% Bonus Depreciation Restored

Generally, taxpayers are required to capitalize the cost of property acquired for use in a trade or business. That cost is then recovered over time through annual depreciation deductions, based on percentages specified in the Internal Revenue Code, until the full acquisition cost has been expensed.

Since 2002, the tax code has allowed taxpayers to claim special depreciation – commonly known as bonus depreciation – on certain types of property, including most machinery, furniture, and equipment. Bonus depreciation is taken in the year the property is placed in service. The allowable percentage has varied over the years, ranging from as low as 30% to as high as 100%. After applying bonus depreciation, taxpayers claim regular depreciation on the remaining cost of the asset, spread over its applicable recovery period (typically 3, 5, 7, or 15 years).

The One Big Beautiful Bill Act (OBBBA) restores 100% bonus depreciation for qualified property purchased after January 19, 2025. The table below compares the updated bonus depreciation percentage under the OBBBA with the scheduled phase-down that would have applied without the bill’s passage.

In addition to restoring 100% bonus depreciation for short-lived property, the OBBBA introduces a temporary 100% bonus depreciation provision specifically for qualified production property. 

100% Bonus Depreciation on Qualified Production Property

The One Big Beautiful Bill Act (OBBBA) introduces a special 100% bonus depreciation allowance for Qualified Production Property constructed after January 19, 2025, and before January 1, 2029, provided the property is placed in service before January 1, 2031 (with certain extensions allowed in cases of natural disasters). The table below outlines the key elements of this new provision.

Under prior law, bonus depreciation was generally unavailable for this type of property, which instead was depreciated over a lengthy 39-year recovery period. As a result, taxpayers faced extended delays before realizing tax benefits that could offset the substantial upfront costs of construction. This new provision represents a significant shift, providing immediate tax benefits that better align with those upfront costs and encouraging investment in the United States.

The One Big Beautiful Bill’s Impact on Nonprofit Organizations

The recently passed One Big Beautiful Bill (OBBB) introduces several tax and policy changes that will directly and indirectly impact nonprofit organizations. Here is a quick summary of the applicable provisions.

Tax Credit for Contributors to Scholarship Granting Organizations (SGOs)

The OBBB introduces a new federal tax credit to encourage private funding for qualified elementary or secondary education expenses through SGOs. Contributions must be charitable cash gifts to SGOs that award scholarships to eligible students who are members of households with income at or below 300% of the area median gross income. U.S. individuals can claim a credit for cash contributions to qualified SGOs in participating states, up to $1,700 per taxpayer per year, with joint filers each eligible for the credit. The federal credit is reduced by any state tax credit received for the same contribution, and contributions claimed for this credit cannot also be deducted as a charitable contribution.

Charitable Giving Incentives

The bill offers some positive measures for nonprofits and individual donors. It introduces a new universal charitable deduction for individuals starting in 2026, allowing non-itemizers to deduct up to $1,000 ($2,000 for joint filers) of charitable contributions. This could potentially boost donations from everyday givers.

Caps and Floors on Itemized and Corporate Giving

Starting in 2026, individuals who itemize can only deduct the portion of charitable donations that exceed 0.5% of their income. A cap on the value of itemized deductions for high-income taxpayers was also included that limits the tax benefit of these deductions to 35% rather than the full 37% previously available to those in the top tax bracket. This change may reduce the incentive for wealthier individuals to make large charitable contributions since it reduces the marginal tax savings they receive. Corporations also have a new 1% adjusted gross income floor and tighter rules on carrying forward unused charitable deductions.

Expanded Excise Tax on Executive Compensation

The OBBB expands the existing 21% excise tax on nonprofit executive compensation exceeding $1 million. Previously, this tax applied only to the top five highest-paid employees, but it now extends to all employees and former employees earning above this threshold. This change, effective for taxable years beginning after December 31, 2025, could significantly increase operating costs for large nonprofits, such as hospitals and universities, where multiple executives may earn high salaries.

Excise Tax Based on Investment Income of Private Colleges and Universities

The OBBB significantly revises the federal excise tax on the endowments of private colleges and universities. Previously set at a flat 1.4%, the new structure introduces a three-tiered system based on an institution’s student-adjusted endowment: 1.4% for endowments between $500,000 and $750,000 per student, 4% for those between $750,000 and $2 million, and 8% for endowments exceeding $2 million per student

The tax now only applies to institutions with at least 3,000 tuition-paying students and expands the definition of taxable investment income to include student loan interest and royalties from federally subsidized research. Taxes on endowments or investment assets decrease the financial resources available to nonprofits to advance their mission.

Conclusion

The OBBB includes some significant changes that will impact nonprofit organizations in various ways. While the new tax credit and charitable giving incentives offer opportunities for increased donations, the expanded excise taxes and the new caps and floors on itemized and corporate giving may discourage some charitable giving.

Impact of One Big Beautiful Bill on The Insurance Industry

The Future of Tax Policy: What Insurance Carriers Need to Know

On July 4, 2025, President Donald Trump signed the One Big Beautiful Bill (OBBB) into law, marking the most sweeping tax and entitlement reform since the 1980s. The bill, passed through budget reconciliation, cements many provisions of the 2017 Tax Cuts and Jobs Act (TCJA) and introduces major changes to healthcare, energy, and federal spending.

Here’s what the new law means for insurance carriers across sectors:

What Was Preserved from TCJA

• 21% corporate tax rate remains in place

• 20% pass-through deduction (Section 199A - Qualified Business Income Deduction) made permanent

• Estate tax exemption increased to $30M (joint) and indexed

• Bonus depreciation restored to 100% and made permanent

• Reserve discounting rules under TCJA remain unchanged, preserving stability and predictability for insurers

• Under TCJA, insurers use standardized discount rates and longer payment patterns to calculate the present value of future claim liabilities. While this reduces deductible reserves (raising taxable income), it provides predictability and consistency in tax planning. If this TCJA provision would have expired, older rules would have likely returned—potentially increasing deductions but also introducing greater variability and complexity 1.
  
  

New provisions under OBBB

• Deductions for tip income, overtime, and auto loans

• $1.15T in federal health spending cuts

• IRS Direct File eliminated

Health Spending Cuts Explained, according to the Congressional Budget Office (CBO):

• ~$930B from Medicaid (via work requirements and financing restrictions)

• ~$170B from Affordable Care Act (ACA) subsidies (via rollback of enhanced credits and stricter eligibility)

• Based on current law as of 2025, instead of a hypothetical TCJA expiration 2

• As the Wall Street Journal editorial board explains in “The Great Budget Baseline Con”, using the current law baseline—where all TCJA provisions expire—can inflate the appearance of spending cuts. The editorial calls this a “budget gimmick” that distorts the real policy impact and public understanding 3.

Impact on Health Insurers:

• Higher churn: For ACA-related plans, the bill eliminates automatic reenrollment and income-based special enrollment periods, and shortens the open enrollment window—leading to more frequent coverage lapses 4.

• Increased compliance costs: New income verification rules, the end of provisional eligibility, and uncapped tax credit repayment introduce more administrative burden and customer service complexity 4.

Impact on Life Insurers:

• More life settlement activity: With the estate tax exemption rising to $30M (joint), high-net-worth individuals may no longer need life insurance for estate liquidity. Combined with rising healthcare costs, more seniors may choose to sell their policies for cash through life settlements—creating turnover and repricing challenges for insurers 5.

• There may also be a shift in demand toward income protection and long-term care hybrids.

Impact on P&C Carriers:

• While the bill doesn’t directly target P&C carriers, its broader economic effects matter.  Carriers must prepare for higher reinsurance costs, regional underwriting shifts, and greater volatility in catastrophe-prone areas.

If TCJA Provisions Would Have Expired

• Top individual rate returns to 39.6%

• Standard deduction halves

• Personal exemptions reinstated

• Section 199A - Qualified Business Income deduction expires

• Estate tax exemption drops to ~$6.5M

• Bonus depreciation phases out

Certified Financial Planners (CFP) Board Survey Insight 6:

A March 2025 survey by the CFP Board found that 88% of CFP professionals believe TCJA expiration would have posed significant risks to clients’ financial goals.

• 57% cited retirement income

• 53% cited legacy planning

• $5.6M+ in potential estate tax liability for High Net Worth couples

(Source: CFP Board via Investment News, March 2025)

Projected Impact on Insurance Carriers:

• There would have been a surge in demand for estate-focused life insurance

• There would have been reduced affordability in health markets

• There would have been expanded casualty loss deductions increasing P&C claims

Strategic Takeaways for Carriers

Model multiple tax scenarios:

• Analyze the impact of different corporate and individual tax rates on product pricing and profitability.

• Assess the effects of potential future changes to the estate tax exemption on life insurance demand.

• Evaluate the implications of various healthcare policy changes on health insurance enrollment and coverage gaps.

• Consider the impact of changes to pass-through deductions on small business insurance products.

• Monitor state legislative developments associated with the passage of this new federal tax law to stay ahead of potential regulatory changes and model their potential impact on the insurance market.

Engage brokers on ACA and Medicaid changes:

• Analyze potential impacts on coverage gaps and enrollment rates.

• Provide training on navigating new income verification rules and handling increased administrative burdens.

• Explore opportunities for brokers to offer solutions that address the anticipated rise in customer churn and compliance costs.

• Consider developing targeted marketing campaigns to educate clients on the implications of policy changes and promote relevant insurance products.

Reassess tax reserves and deferred tax assets:

• Review and update tax reserve calculations to reflect the new corporate tax rate and other relevant provisions.

• Evaluate the impact of the permanent bonus depreciation on deferred tax assets and liabilities.

• Model various tax scenarios to anticipate potential future changes and their effects on financial statements.

• Collaborate with tax advisors to ensure compliance with new income verification rules and other administrative requirements.

• Consider the implications of health spending cuts on tax reserves related to health insurance products.

Final Thought

The One Big Beautiful Bill is now law—and with it, a new era of tax and entitlement policy begins. Insurance carriers that act now to adapt their pricing, product strategy, and compliance posture will be best positioned to thrive in this transformed landscape.

Frequently Asked Questions About the One Big Beautiful Bill Act:  Business Tax Provisions

What major business tax provisions did the One Big Beautiful Bill Act introduce?  The Act includes several key business tax changes, such as making the Section 199A Qualified Business Income deduction permanent, modifying the Section 163(j) business interest limitation, increasing the threshold for Form 1099 filings, updating rules for deductible business meals, and expanding benefits like Qualified Small Business Stock treatment and domestic research expense deductions.

Is the 20% Qualified Business Income (QBI) deduction permanent under the new law?  Yes — the Act permanently extends the Section 199A QBI deduction, ensuring that eligible owners of pass-through businesses can continue to claim the 20 % deduction on qualified income beyond the previous sunset date.

How does the Act change business interest expense deductions?  The law revises the Section 163(j) business interest limitation, restoring a more favorable calculation method that allows certain deductions for interest expense — generally making it easier for businesses to deduct interest by adjusting the definition of adjusted taxable income.

What new thresholds or reporting changes affect small businesses?  Under the Act, the threshold for filing certain Form 1099 information returns has been increased, which means businesses now report fewer small-value payments than under the old $600 rule.

Are there any new or expanded tax benefits for business investments?  Yes — the bill expands tax benefits including Qualified Small Business Stock tax benefits under Section 1202, provides new rules for domestic research and experimentation deductions, and restores 100 % bonus depreciation for qualifying assets.

We highly recommend you contact a member of the Larson & Company tax team to discuss the aspects of these provisions that apply directly to you to ensure you have the most applicable information for your situation.