The One Big Beautiful Bill Act (OBBBA), enacted on July 4, 2025, has many wide-reaching implications that business owners and individual taxpayers need to consider. GYF’s Business Valuation and Tax professionals, Melissa Bizyak, Brad Matthews and Mike Weber, recently presented a continuing legal education program to make attorneys aware of some of the ways the OBBBA will impact the value of their clients’ companies.
The OBBBA includes numerous tax provisions that are immediately applicable, while others will occur over the next 10 years. Some of the key impacts of the OBBBA on business valuation, which were discussed at this program and are recapped in this post, include:
- Bonus Depreciation
- Section 179 Deduction
- Corporate Tax Rates
- Section 174 Research & Experimental (R&E) Expenditures
- Net Operating Losses (NOLs)
Key Provisions Impacting Value
Bonus Depreciation – With the enactment of OBBBA, 100% bonus depreciation was made permanent, allowing companies to immediately write-off all capital expenditures in the year they are placed in service. From a valuation perspective, this change increases the tax shield available to companies as they are able to write-off all capital expenditures, lowering taxable income in that year. A reduction to the income tax payable by the company increases their after-tax earnings.
Section 179 – The OBBBA increased the Section 179 deduction from $1.0 million to $2.5 million, with broader applicability than previously allowed. Similar to bonus depreciation, this change increases the tax shield associated with capital expenditures as companies are able to write-off a larger amount of capex than they historically were allowed. As a result of the large write-offs, the amount of pre-tax income subject to income taxes is decreased. Additionally, this provision will impact real estate and improvements going forward as companies will automatically get a greater deduction for such investment.
Corporate Tax Rate – Under the OBBBA, the 21% corporate tax rate has been made permanent. From a valuation perspective, this rate will increase after-tax cash flows, resulting in higher valuation multiples.
Section 174 R&E Expenditures – Previously, domestic R&E expenditures were required to be capitalized and expensed over five years, which created a disconnect between the timing of the expense and the deductibility against taxable income. Under the OBBBA, this requirement was repealed, allowing R&E expenditures to be deducted immediately. This change will increase the tax shield, subsequently increasing after-tax earnings.
Net Operating Losses – Under the OBBBA, the carryforward treatment of NOLs has been made permanent. Carrying losses forward creates a tax benefit for companies in the future. Additionally, in an acquisition, the acquirer will be able to utilize any prior NOLs going forward, with critical examination expected during stock transactions.
In addition to the aforementioned provisions, the OBBBA affects the cost of capital used in business valuation by lowering the tax shield on debt. From a valuation perspective, this change will increase the weighted average cost of cost for most companies.
Final Thoughts
Overall, as the OBBBA provisions take effect, valuation professionals should revisit key inputs and levers built into valuation models to ensure that the value is determined correctly. If you have any questions regarding the OBBBA provisions or how they specifically impact the value of your business, please contact GYF at 412-338-9300.
