Tax insight

Realigning year-end planning considerations after the One Big Beautiful Bill Act

Insight
10 minute read
November 26, 2025

What happened?

Immediate deductions for domestic research or experimental (DR&E) expenditures and bonus depreciation can reduce or potentially eliminate taxable income in 2025, creating the opportunity for a significant cash tax benefit. However, lower taxable income can increase exposure to minimum tax regimes, like the corporate alternative minimum tax (CAMT) or the base erosion and anti-abuse tax (BEAT), and adversely affect the computations of other deductions or credits that depend on taxable income. Accounting method planning techniques can be paired with different elections under the One Big Beautiful Bill Act (the Act) to manage taxable income and limit other downstream impacts from the changes.

Why is it relevant?

Decisions on DR&E and bonus depreciation can affect a company’s deductions for interest expense or charitable contributions and the utilization of attributes, such as net operating losses (NOLs) or foreign tax credits (FTCs). Likewise, other downstream impacts could include changes to foreign-derived deduction-eligible income (FDDEI), global intangible low-taxed income (GILTI), and subpart F inclusions. Additionally, changes in a company’s operations or its financial accounting methods could alter when income is recognized or deductions are incurred for federal income tax purposes, creating opportunities that could impact the company’s cash tax position or effective tax rate.

Action to consider 

The options provided by the Act for DR&E and bonus depreciation complicate year-end planning efforts. Companies should evaluate the need to manage taxable income by considering changes in facts, making elections and/or filing changes in accounting method before December 31, 2025. Although many accounting method changes can be filed with federal income tax returns using automatic change procedures, other changes subject to nonautomatic procedures must be filed by the end of the tax year for which they are to be effective.

Observation: As the increased deductions due to the Act are likely to affect many tax attributes, companies need to model the effects of the enhanced deductions provided by the Act and consider whether the various alternative elections that are available for DR&E and depreciable property would be beneficial. In addition, businesses should consider whether any potential beneficial changes in fact or method changes affecting these computations should be effectuated by year-end.