What finance leaders should keep in mind about OB3 as new tax year looms

OB3—no, it’s not the name of the newest Star Wars droid sidekick (we’ll never forget you, R4). Also abbreviated as OBBBA, it’s an important acronym to know, a shorthand for the “one big, beautiful bill” that Republican lawmakers passed this summer.

The massive tax legislation was chock full of provisions potentially impacting your organization’s tax planning and liabilities. It extended some of the major pieces of the 2017 Tax Cuts and Jobs Act (TCJA), such as 100% bonus depreciation on property and equipment investments. But it also included plenty of new provisions, including the elimination of tax on tips and overtime.

Untangling such a large and consequential piece of legislation may feel, well, taxing. CFO Brew asked tax experts to break down the biggest pieces of the complex bill and advise what companies should prioritize heading into next year and beyond.

Awaiting further instructions. Beyond any specific provision, companies are wondering how to plan while tax guidance still trickles in from the IRS, according to Jennifer Acuña, who co-leads the federal legislative and regulatory services group of KPMG’s Washington national tax practice.

President Donald Trump signed OB3 into law on July 4, but the legislation was not in its final form. It was then up to the IRS to flesh out the nitty-gritty through regulatory guidance, Acuña noted. Speaking with CFO Brew in early November, Acuña said there wasn’t “a ton of regulatory guidance [or] specifics” on the legislation at that point.

“The statute is intended to be the bones of the structure,” she explained. “But those really detailed, entity-by-entity, company-by-company specific, unique facts…are usually addressed in regulatory and subregulatory guidance.”

KPMG recommends companies assess the potential impact of the new provisions through modeling, “so that you can ask for those specific clarifications to be included in the [guidance] package that is released,” Acuña said.

“That should be priority number one,” she continued. “That is the difference between having to make an assumption, or maybe not taking a position that is as advantageous as it could have been.”

In fact, Acuña couldn’t stress that advice enough.

“We say [to clients], ‘Modeling, modeling, modeling.’...You don’t want to be caught off guard with an interaction that you were not expecting,” she said.

Speaking of modeling. Acuña advised that companies, when modeling for different scenarios under the new tax law, consider how the provision may interact with the corporate alternative minimum tax (CAMT), a 15% tax floor on the adjusted financial statement income (AFSI) of large corporations that was created by the Biden-era Inflation Reduction Act.

Deloitte experts recently cautioned in online commentary that “lowering regular taxable income may increase CAMT exposure.” This can happen when companies take deductions that “do not also reduce AFSI,” according to Deloitte.

C-suite leaders may want to take advantage of every new tax benefit the OB3 provides, “but the tax folks have to say, ‘Not so fast,’” Acuña said. Modeling for possible CAMT implications “isn’t a path for the unwary,” she added.

Back to the future? Thanks to OB3, corporations can again immediately deduct all research and development (R&D) expenses on their returns, rolling back the clock to the pre-TCJA era. The first-term Trump tax law required companies to amortize domestic R&D expenses over five years and foreign R&D over 15 years, starting in 2022. OB3 leaves that requirement on foreign investment in effect, but dropped the domestic one.

OB3 also provided a redo button for those R&D expenses that businesses deducted under the TCJA rules. Certain businesses can amend their previous returns and “catch up” in tax year 2025 by deducting the rest, or they can opt to take those deductions over 2025 and 2026, Kyle Kmiec, a principal at accounting firm SVA, told us.

But which option should a company choose? That depends, according to Kmiec. “If you were having good years in ’22 and ’23, you probably want to go back and amend it,” but companies should keep in mind that the IRS could take up to 18 months to process the amended return, he said.