Answers to Your One Big Beautiful Bill Act Tax Questions

• OBBBA: Key Changes For Business Owners
• Expired Provisions Restored
• A Compressed Planning Window
• Employee Compensation and Reporting Requirements
• Expanded Employer Benefits
• Charitable Contribution Changes
• How Business Size Affects the Impact of the OBBBA
• Strategic Planning for 2026 and Beyond
• How East West Bank Can Help

• Revived or expanded favorable corporate provisions that had expired or been phased out. For example, businesses can now fully deduct domestic Research and Experimentation (R&E) costs, providing a significant cash flow boost for research-heavy industries like technology, pharmaceuticals and manufacturing. The OBBBA also expanded and made permanent the 20% Qualified Business Income (QBI) deduction, providing long-term certainty for pass-through business owners.
  
• Shortened the window for certain incentives, requiring faster decision-making. These include, but are not limited to, accelerating the phase-out of clean energy tax credits, most notably solar and wind energy, requiring businesses to reassess their energy projects and investment strategies. 
  
• Introduced new reporting and compliance obligations. These include, but are not limited to, the establishment of a 1% federal excise on certain electronic transfers of money sent from within the United States to a foreign person where the sender provides cash, money order, cashier’s check or other similar payment methods. Other changes include, but are not limited to, increasing the 1099-K reporting threshold from $600 and no minimum number transactions to $20,000 and 200 transactions for third-party settlement organizations such as payment processors and online marketplaces.

Key Takeaways: Planning matters more than ever—and timing matters even more.

• Expanded and made permanent the 20% Qualified Business Income (QBI) deduction, providing long-term certainty for pass-through business owners.
  
• Permanently extended and modified the Qualified Opportunity Zones (QOZ) program to incentivize investment in economically distressed communities.
  
• Restoring full expensing for domestic research and experimentation costs starting in 2025.
• Returned bonus depreciation to 100% for qualifying assets.
• Recalculated the interest expense limitation to better favor businesses.

Restoration of the QBI deduction allows owners of sole proprietorships, partnerships, S corporations, and certain trusts to deduct up to 20% of qualified business income, plus 20% of qualified real estate investment trust (REIT) dividends and publicly traded partnership (PTP) income. The permanent extension of the QOZ program also enables investors to defer and potentially reduce capital gains taxes through investments in Qualified Opportunity Funds.

Key Takeaways: These changes can help businesses improve cash flow and add certainty to capital planning, hiring and expansion. For many businesses, they can reduce the after-tax cost of growth, especially in capital-intensive and innovation-driven sectors. Business owners should review their structure and income thresholds and consider strategic restructuring, income smoothing or reclassification opportunities to optimize their overall tax position.

• Many clean energy, infrastructure and efficiency incentives now expire sooner.
  
• New rules scale back incentives, impose tougher compliance hurdles and tighten eligibility requirements and documentation standards.
  
• New foreign entity of concern (FEOC) restrictions limit access to certain clean energy credits.

Qualification deadlines for many renewable energy credits have been accelerated and eligibility rules tightened, which is shrinking access to federal tax benefits and increasing compliance complexity.

Key Takeaways: Projects that once had long planning runways may now require earlier execution and more robust documentation, and eligibility will become progressively harder to maintain. Businesses considering major capital or infrastructure investments must closely track supply chains and avoid delays, which can result in lost benefits.

• Certain workers may deduct up to $25,000 per year in qualified tips and overtime premium pay on federal returns from 2025–2028.
  
• Employers with hourly, tipped or overtime-based workforces must separately track and report qualifying amounts, which require updating withholding and payroll processes.
  
• Payroll systems must track these categories separately for 2026 Form W-2 reporting. Draft instructions include new codes (“TP” for tips, “TT” for overtime) and a new Treasury Tipped Occupation Code (TTOC) box.

Key Takeaways: Employers should coordinate with HR, payroll and tax teams to understand what qualifies as eligible overtime compensation to ensure employees are being provided with correct information for individual taxes. Budget for potentially higher payroll costs and update payroll systems and time-tracking practices to comply with more complex reporting requirements. Strong coordination between HR, finance, payroll and tax advisors is essential.

• Permanently extended paid family and medical leave (PFML) tax credit.
  
• Expanded eligibility for businesses in states with mandatory leave programs.
  
• Enhanced tax credits for employer-provided childcare.

Employers may now claim a credit equal to 12.5%–25% of wages paid to qualifying employees for up to 12 weeks of leave. This allows employers to continue benefiting from the credit in future years.

Key Takeaways: These benefits create opportunities for businesses owners to improve employee retention, satisfaction and workforce stability. Employers should review leave policies to maximize available PFML credits.

• Corporations (C-Corps). Creates a new floor equal to 1% of taxable income and retains the 10% taxable income ceiling for charitable contributions. Charitable deductions exceeding the 10% taxable income ceiling may be carried forward up to 5 years.
  
• Pass-through entities. While partnerships and S corporations do not claim a charitable deduction at the entity level, the contributions may flow through to individuals who are subject to a new charitable contribution floor with amounts under 0.5% of taxable income no longer being deductible and reduced deductibility of some amounts above that depending on income rate.
  

Key Takeaways: Corporations may want to potentially combine giving that might be done over several years into one year to ensure they exceed the 1% threshold. High-income individuals who itemize deductions should consider the timing and amounts of their giving to maximize their deduction.

• Small and mid-sized businesses may see cash-flow benefits from revived expensing and depreciation rules but face pressure to modernize payroll and reporting systems.
  
• Larger businesses must more carefully evaluate controlled-group rules, compensation structures and long-term capital planning.
  

Key Takeaways: No matter your business size, proactive planning is essential. Reactive planning may lead to missed opportunities and/or compliance challenges.

• Reviewing capital investment and depreciation strategies.
  
• Evaluating payroll systems and reporting readiness.
  
• Stress-testing cash flow under different tax and tariff scenarios.
  
• Coordinating earlier with tax advisors and financial partners.
  

Key Takeaways: Planning is no longer just about compliance: It’s about strategy.

• Cash flow and liquidity planning
  
• Capital investment timing
  
• Treasury and risk management strategies

With the right strategy and support, complexity can become a competitive advantage.