Business and corporate federal tax planning: A guide for tax year 2025

Restored expensing of research costs

OBBBA repealed the Tax Cuts and Jobs Act-era requirement to capitalize and amortize domestic research and development (R&D) expenses. Businesses can now fully deduct qualifying domestic R&D costs in the year incurred. This reduces current taxable income and taxes paid, especially for companies investing in product development process improvement or technology.

Dig deeper:

• OBBBA restores favorable tax treatment of domestic R&D expenses
• IRS releases OBBBA section 174 acceleration election procedures

Qualified business income deduction

The qualified business income (QBI) deduction for pass-through entities under section 199A is now permanent, offering a 20% deduction on QBI for eligible taxpayers. This provision reduces the effective tax rate for many middle market businesses, improving cash on hand and reinvestment capacity.

Dig deeper: Permanent QBI deduction provides some tax planning certainty

Energy credit eligibility changes

OBBBA modified the scope and timing of certain clean energy credits, narrowing access for some businesses while preserving opportunities for others. While some incentives remain for domestic manufacturing of certain clean energy components, others have been scaled back or phased out.

Claiming available credits can offset tax liability and improve profitability, but businesses must reassess eligibility under the revised rules.

Dig deeper: Tax bill significantly changes clean energy credits and incentives

State tax optimization

Federal tax relief may not always translate to state savings. Businesses operating in multiple jurisdictions must manage state-specific rules to protect margins.

State tax burdens can erode profitability if not proactively managed—especially in high-tax states or those with limited conformity to federal changes.

Dig deeper: State and local tax year-end planning and strategic considerations

Credits and incentives

Tax credits and incentives are powerful tools for improving liquidity—yet many businesses underutilize them. In 2025, the landscape includes both long-standing federal programs and newer opportunities influenced by the Inflation Reduction Act of 2022 (IRA) and OBBBA.

Whether your business is investing in clean energy, hiring workers, conducting research or expanding operations, tax planning can help you identify, claim and monetize credits that directly support cash flow.

How can RSM help you? Learn more about our tax credits and incentives services

Interest expense deductibility

OBBBA raised the section 163(j) limitation threshold, allowing businesses to deduct potentially more interest expense. This may be especially helpful for leveraged companies and those with recent debt restructurings.

Dig deeper: OBBBA restores higher business interest expense limit: How businesses can benefit

Bonus depreciation and asset timing

Now that OBBBA reinstated 100% bonus depreciation, businesses can accelerate deductions for qualifying assets—freeing up cash that would otherwise be tied up in tax payments.

Dig deeper: OBBBA restores and expands bonus depreciation: What it means for businesses

Estimated tax payments and refund opportunities

Changes to R&D expensing and other deductions may reduce taxable income, creating opportunities to adjust estimated payments or claim refunds.

Dig deeper: Accounting for the income tax impacts of OBBBA

Net operating losses (NOLs)

If your business experienced losses in recent years, now is the time to revisit NOL utilization—especially in light of improved deductibility and restored expensing rules.

Energy credit monetization

Clean energy credits remain transferable under provisions introduced in the IRA. While OBBBA significantly adjusted some eligibility criteria and timing parameters, credit monetization rules provide liquidity for businesses —even if they don’t directly produce energy.

Dig deeper: IRS and Treasury issue final regulations on the transfer of energy credits

Expanded qualified small business stock (QSBS) exclusion

OBBBA expanded the QSBS rules allowing more taxpayers to exclude gains on the sale of QSBS. By expanding the size of both the exclusion and the eligible business, QSBS provides private equity, founders, employees and investors the ability to exclude even more gains from taxation. This is a powerful capital-raising tool for many start-ups and PE-raising funds to invest in small businesses.

Dig deeper: OBBBA expands QSBS exclusions: What it means for businesses and investors

Expanded interest deductibility

OBBBA raised the section 163(j) limitation threshold, allowing more businesses to deduct more interest expense. This change benefits companies with leveraged capital structures, especially those in private equity portfolios or undergoing expansion.

Dig deeper: OBBBA restores higher business interest expense limit: How businesses can benefit

Financing growth and acquisitions

Debt remains a preferred tool for funding M&A and expansion. Debt structuring can maximize deductibility of interest and certain financing costs, potentially lowering cash tax at both the federal and state and local levels.

How can RSM help you? Learn more about our M&A tax services

Debt restructuring and refinancing

Many businesses have refinanced debt to manage interest rate volatility. These transactions can trigger cancellation of debt income (CODI), which may be taxable unless exceptions apply.

Debt vs. equity planning

The IRS continues to scrutinize related-party financing and thin capitalization. Businesses must ensure that debt is properly documented and economically substantiated to avoid reclassification as equity.

Entity structure optimization

With the qualified business income deduction now permanent, pass-through entities may offer long-term tax advantages for certain business models. However, corporations still benefit from simplified compliance and access to capital markets.

Dig deeper: Business structure and entity choice: Keys to a complex decision

Stock buyback excise tax

The 1% excise tax on corporate stock repurchases remains in effect, continuing to influence capital return strategies. Public and closely held corporations must weigh the cost of buybacks against other shareholder distribution methods.

Dig deeper: IRS finalizes regulations on stock repurchase excise tax

Bonus depreciation reinstated

OBBBA reinstates 100% bonus depreciation for qualified property acquired and placed in service after Jan. 19, 2025. This allows businesses to deduct the entire cost of eligible assets in the year they are placed in service—boosting short-term cash flow and reducing taxable income.

Dig deeper: OBBBA restores and expands bonus depreciation: What it means for businesses

Qualified production property

For the first time, certain nonresidential real property—specifically factory and production buildings—may qualify for 100% bonus depreciation under new section 168(n). This provision expands the scope of immediate expensing beyond traditional tangible personal property.

Dig deeper: How the qualified production property provision could fuel industrial growth

Immediate expensing of qualifying business assets

Businesses can immediately expense qualifying property up to a statutory limit under section 179. While bonus depreciation is more expansive, section 179 may be preferable for certain assets or in states that conform more closely to section 179 than to bonus depreciation.

Cost segregation studies

Cost segregation can accelerate depreciation by identifying assets of real property that qualify for shorter recovery periods. This strategy is especially valuable for newly acquired or renovated buildings.

How can RSM help you? Learn more about our tangible property tax consulting services

Interaction with credits and NOLs

Aggressive expensing strategies can reduce taxable income to levels that limit the ability to utilize general business credits or absorb net operating losses. Modeling is essential to avoid underutilization.

Expensing of research costs

OBBBA repealed the Tax Cuts and Jobs-era requirement to capitalize and amortize domestic R&D expenses. Businesses can now fully deduct domestic qualifying research costs in the year paid or incurred.

Immediate expensing may improve cash flow and may reduce current taxable income, especially for companies investing heavily in innovation, software development, or process improvement.

Dig deeper: OBBBA restores favorable tax treatment of domestic R&D expenses

Innovation funding and strategic alignment

Tax incentives can support a broader innovation strategy—whether funding internal development, partnering with universities or investing in emerging technologies. Tax planning can help prioritize projects and allocate resources by modeling the after-tax return on investment (ROI).

State-level R&D incentives

Many states offer their own R&D credits or incentives, while conformity to federal rules varies widely. State credits can enhance the returns on innovation investments, but they require separate documentation and compliance.

Building vs. buying AI capabilities

While operational goals will drive your choice between building or buying AI capabilities, tax planning can help clarify the financial impact of each approach.

Building AI capabilities—such as training proprietary models, coding custom software or investing in infrastructure—can unlock significant tax benefits. Under OBBBA, domestic R&D costs are immediately deductible, and qualifying infrastructure may be eligible for 100% bonus depreciation. These deductions can reduce taxable income and improve cash flow in the year of investment.

Buying AI solutions, on the other hand, may offer faster deployment and lower upfront costs, but this approach typically results in capitalized software or licensing expenses that are amortized over time. Purchased software may qualify for section 197 amortization, but it generally does not trigger R&D credits or immediate expensing unless substantial customization is involved.

R&D expensing for AI development

OBBBA restored immediate expensing for domestic research costs, including software development and AI model training. This change allows businesses to deduct qualifying costs in the year incurred—improving cash flow and shortening the cost recovery period for innovation.

Bonus depreciation for AI infrastructure

AI initiatives often require significant investment in servers, data platforms and edge computing devices. The reinstated 100% bonus depreciation provision allows businesses to fully expense qualifying assets placed in service after Jan. 19, 2025.

AI-related software and intangible assets

While domestic development costs are fully deductible, foreign R&D—including offshore AI model training or software engineering—must still be amortized over 15 years. Businesses must carefully track the location and nature of expenditures to avoid disallowed deductions.

State and local tax incentives for AI investment

Several states offer credits or grants for technology investment, workforce training and digital transformation—including AI adoption. These incentives can offset implementation costs, but eligibility and documentation requirements vary widely.

Audit readiness and AI scrutiny

State and federal tax authorities are increasingly using AI tools to identify audit triggers—especially around R&D credits, software development and intercompany transactions. Businesses investing in AI should expect scrutiny and prepare accordingly.

Dig deeper: IRS will use AI to help target partnerships and high net worth individuals

OBBBA enactment

Key OBBBA provisions—including bonus depreciation, interest expense limitations and domestic R&D expensing—create temporary differences that must be reflected in financial statements for periods including the enactment date.

Under ASC 740, tax law changes are recognized in the period of enactment. Year-end provisions will need to reflect OBBBA effects on current and deferred taxes, including how deferred taxes are affected by OBBBA changes that have future effective dates.

Dig deeper: Accounting for the income tax impacts of OBBBA

ASC 740 disclosure enhancements

Expanded disclosure requirements under ASU 2023-09 mandate more detailed reporting around income tax expense, effective tax rates and jurisdictional impacts. While the standard was issued in 2023, many businesses are implementing it for the first time in 2025, making it newly relevant for provision planning. The changes increase transparency for investors and regulators, and they require more granular data and reconciliation.

Uncertain tax positions (UTPs)

The IRS continues to scrutinize positions related to R&D credits, transfer pricing and executive compensation. ASC 740 requires businesses to assess and disclose the likelihood and impact of potential challenges. Failure to properly evaluate and document UTPs can lead to restatements, penalties and reputational risk.

Provision software and process optimization

Many middle market businesses are adopting provision software to handle increased complexity and improve collaboration between tax and finance teams. Modern tools can reduce errors, improve audit readiness and support faster close cycles.

How can RSM help you? Learn more about RSM’s CorporateSight, our all-in-one tax compliance and provision platform

Strategic forecasting and scenario modeling

Tax provision reporting should support strategic decision making—especially in light of recent tax reforms—as well as ongoing M&A activity and global expansion. Scenario modeling helps businesses anticipate tax impacts and make informed decisions about timing, structure and investment.

Limits on executive compensation

OBBBA broadens the scope of section 162(m), which limits the deductibility of compensation over $1 million for covered employees. For taxable years beginning in 2026, the deduction limitation applies to all members of a controlled group that includes a publicly held corporation. This change may affect compensation planning for executives, especially for entities that are trust-owned or in an umbrella partnership/C corporation (up-C) or a real estate investment trust structure.

Additionally, for taxable years beginning in 2027, the definition of “covered employee” is expanded to the five-highest compensated employees in addition to the officers already identified, thus increasing the number of individuals subject to the cap.

Dig deeper:

• How OBBBA affects tax treatment of compensation and benefits
• A total rewards approach to executive compensation

Remote and multistate workforce tax implications

With remote work permanent for many roles, businesses must manage the tax implications of employees working across state lines—including payroll withholding, nexus creation, and benefit eligibility. Multistate payroll can trigger unexpected tax obligations and compliance risks if not proactively managed.

Dig deeper: Remote work tax: Employer compensation considerations

Equity compensation strategy

Stock options, restricted stock units (RSUs) and other equity-based incentives remain key tools for attracting and retaining talent—but they carry complex tax implications for both the company and the employee.

Equity grants can affect taxable income, deductibility and financial reporting—especially in pre-IPO or high-growth environments.

Dig deeper: How well do you understand your equity compensation options?

Fringe benefits and expense deductibility

OBBBA did not reverse prior limitations on meal, entertainment and certain fringe benefit deductions—but businesses should still review policies to support compliance and maximize allowable deductions. Improperly documented or structured benefits can lead to disallowed deductions and audit risk.

Dig deeper: Business meals and entertainment: A summary of tax deductions

Transfer pricing and intercompany transactions

The IRS continues to prioritize enforcement around transfer pricing, especially for businesses with cross-border supply chains or related-party transactions. Improper pricing or documentation can lead to audit risk, penalties and double taxation—particularly for businesses importing goods or services from affiliates.

Dig deeper: How middle market companies can manage the transfer pricing lifecycle

Inventory planning and accounting methods

Supply chain disruptions and inflation have prompted many businesses to revisit inventory strategies. Tax treatment of inventory—especially under section 263A and related method changes—can significantly affect taxable income.

Choosing the right inventory method and timing purchases strategically can improve cash flow and reduce tax liability.

Dig deeper: Tariffs and tax accounting: How to manage costs

Clean energy credits

With the enactment of OBBBA, sourcing of clean energy components will become more important. Certain incentives will be restricted if sourced from prohibited foreign entities under complex new rules.

For existing investment tax credits for certain eligible property, domestically sourced components, steel and iron may lead to increased credits.

Key changes

• Wind and solar credits (sections 45Y and 48E), which terminate for facilities placed in service after Dec. 31, 2027, unless construction begins within 12 months of enactment, must now also meet rules regarding prohibited foreign entities
• Advanced manufacturing production credits for wind and solar components (section 45X) phase out after 2027, with stricter eligibility rules for integrated components
• Transferability of credits is prohibited for entities with ties to certain foreign governments

Dig deeper: Tax bill significantly changes clean energy credits and incentives

How can RSM help you? Learn more about our clean energy tax credits and incentives services

State and local tax exposure

Expanding or shifting supply chain operations can create new nexus in states and local jurisdictions—triggering income, sales, and franchise tax obligations. Unmanaged state tax exposure can erode margins and create compliance risk.

Dig deeper: State and local tax considerations when building supply chain resilience

Tariffs, customs and indirect tax considerations

Global sourcing decisions can affect tariffs, customs duties, value-added taxes (VATs) and other indirect taxes—especially as trade policies evolve and governments respond to geopolitical and economic pressures. Indirect tax costs can be significant and often overlooked in supply chain planning.

Dig deeper: Tariffs, trade and transformation: What every CFO needs to know

How can RSM help you? Explore our trade advisory services and our indirect tax services

State conformity to federal changes

Federal tax relief may not translate to state savings because states vary widely in how they conform to federal tax law—including those involving research costs, bonus depreciation and allowable business interest expense deductions. In fact, expanding into a new state may mean navigating a completely different set of rules. Businesses could face higher tax burdens or compliance costs if they don’t plan ahead.

Dig deeper: SALT considerations from OBBBA

Nexus and filing obligations

Physical presence, remote employees, inventory storage and economic activity can all create nexus—triggering income, franchise, and sales tax obligations in new jurisdictions. Unmanaged nexus exposure can lead to penalties, back taxes and reputational risk.

Dig deeper: Wayfair turns five: A coming of age story

How can RSM help you? Learn more about our income and franchise tax services

Local credits and incentives

Many states and municipalities offer tax credits or incentives for job creation, capital investment or clean energy adoption. These incentives can offset expansion costs and improve ROI. Businesses that plan ahead can capture valuable incentives that reduce tax liability and support growth.

How can RSM help you? Learn more about our state tax credits and incentives services

International expansion: Structuring for success across borders

Expanding globally opens doors to new markets, but also to intricate tax challenges. From withholding taxes and transfer pricing rules to treaty benefits and local compliance, each jurisdiction brings its own set of rules. Without thoughtful planning, businesses risk double taxation, missed incentives and operational inefficiencies.

Dig deeper: International tax planning: A guide for tax year 2025

How can RSM help you? Learn more about our international tax services and global business model tax services

Sales and use tax compliance

Selling into new states or countries may trigger sales tax or VAT obligations—even without a physical presence. Sales tax rules are evolving rapidly, and noncompliance can be costly.

How can RSM help you? Learn more about our sales and use tax automation services

IRS enforcement priorities

Middle market businesses are increasingly under the IRS’s microscope, especially those with complex structures or aggressive positions. The IRS is targeting high-risk areas, in some cases using AI-driven audit selection.

Key focus areas include:

• Partnerships and pass-through entities
• Large corporations
• High net worth individuals
• Employee retention credit (ERC) claims
• Employment tax exams

Dig deeper:

• 5 key IRS audit triggers and how corporations can minimize their risk
• Master the IRS examination process: Your essential IRS audit survival guide

Research credit

The IRS continues to challenge R&D credit claims that lack contemporaneous documentation or involve software development activities that don’t meet the statutory definition of qualified research. While the credit remains a valuable incentive, it also remains an audit target. Improper claims can lead to disallowance, penalties and reputational risk.

Employee retention tax credit (ERC) claims

The IRS continues its enforcement around ERC claims, focusing on fraudulent or unsupported filings from third-party promoters. Businesses that claimed ERC must be prepared to defend their eligibility and calculations.

Dig deeper: What you need to know about OBBBA and the employee retention tax credit

Executive compensation and fringe benefit audits

Expanded limits on the deductibility of executive compensation have increased compliance complexity. In addition, fringe benefits—such as personal use of company vehicles, club memberships and nonqualified deferred compensation—are under closer scrutiny. Deductibility limits and reporting requirements can trigger audits and penalties if not properly managed.

International compliance and transfer pricing

Cross-border transactions and transfer pricing remain high-risk areas, especially for businesses with foreign subsidiaries or intercompany arrangements. Global enforcement coordination is increasing, and documentation standards are tightening.