In a recent webinar, OBBBA’s Impact on Technology & Software: Strategies to Consider, Forvis Mazars and its Washington National Tax Office (WNTO) explored the implications of the One Big Beautiful Bill Act (“OBBBA”) and its impacts on technology and software companies’ tax and business strategies. Below is a summary of insights that U.S. technology businesses may keep front of mind for planning and cross-border considerations:
1. Modeling the Impact of Interconnected Changes
The importance of modeling and conducting a detailed analysis to understand the interconnected outcomes of the OBBBA provisions, particularly for businesses with international operations, cannot be understated. The reinstatement of 100% bonus depreciation, adjustments to Section 174A (R&D costs), and changes to business interest expense limitations (Section 163(j)) can significantly affect tax positions. Businesses must consider how these provisions interact, not only domestically but also in cross-border contexts like global intangible low-taxed income (GILTI) regimes and foreign tax credits. For example, adoption of bonus depreciation, while attractive initially, could generate net operating losses (NOLs), which would limit ability to claim foreign tax credits or a §250 deduction for GILTI inclusions. The complexities introduced by the law demand careful scenario analysis, not just a one-time review but ongoing modeling as new guidance and real-world implications evolve. This vigilance may help organizations avoid errors, identify risks, and recognize potential opportunities that may arise from legislative and regulatory shifts.
2. Providing Some Certainty for Businesses & Enabling Future Planning
Several provisions of the OBBBA offer businesses much-needed predictability, allowing for more strategic tax planning. For instance, the permanent reinstatement of 100% bonus depreciation and the return of immediate expensing for domestic R&D costs provide clarity that was absent when these laws were altered in recent years. Businesses can more confidently structure long-term investments, knowing that full bonus depreciation has been reinstated and that domestic R&D expenditures can revert to immediate deductions instead of mandatory amortization. Similarly, extensions and changes to individual tax policies, such as the new permanency of the §199A deduction and the increased estate and gift tax exemptions, create more stability that allows both businesses and individuals to adopt forward-looking strategies with greater confidence.
3. Further Guidance Needed on Employer Obligations on Tips & Overtime Reporting
A notable element of OBBBA’s focus on individual tax relief is deductions associated with tipped income and overtime, slated for implementation in 2025. However, there remains a pressing need for clear Treasury and IRS guidance regarding employer reporting obligations. Specific challenges include defining what qualifies as tips, such as the treatment of automatic gratuities, as well as the reporting of overtime income and determining the eligible portion for exclusion. Businesses face ambiguity on how to align payroll and W-2 reporting with these deductions, given that IRS withholding forms will not reflect these provisions until 2026. With 2026 draft forms still in development, the IRS will need to provide clarity to help companies comply with these requirements while enabling employees to calculate their eligible deductions.
How Forvis Mazars Can Help
Whether navigating the complexities of interconnected tax provisions, leveraging regulatory permanency for long-range plans, or awaiting critical reporting guidance, businesses are urged to engage in detailed tax modeling. These steps will help prepare software and technology companies to adapt and respond effectively to a rapidly evolving tax landscape. To learn how we can help your organization prepare for what’s next, reach out to a Forvis Mazars professional today.