Newsroom
Events
Subscribe

Article

How tax changes in the One Big Beautiful Bill Act affect insurance companies

New tax rules will prompt growth-minded insurers to reassess debt and R&D plans

September 09, 2025
#
Business tax Tax policy Insurance

Executive summary: Tax relief for insurance companies

The One Big Beautiful Bill Act (OBBBA) introduces a range of business tax relief provisions with meaningful implications for insurance companies. These changes affect how insurers manage deductions, structure operations and plan for long-term financial performance.

Whether navigating interest expense limitations, investing in technology platforms, or evaluating international tax exposure, insurance companies must consider how these provisions interact with surplus, reserve requirements, and regulatory reporting. This article breaks down the most relevant OBBBA tax items and explains what they mean for insurers.

Insurance companies face a combination of enhanced tax benefits and business challenges stemming from tax provisions in the OBBBA. Now that there is a federal tax policy roadmap for the foreseeable future, here is a closer look at key OBBBA tax items and their implications for insurance companies.

Business interest expense deduction limitation

The OBBBA returns to the original Tax Cuts and Jobs Act (TCJA) calculation for business interest expense limitations. It allows the addback for depreciation, depletion and amortization to the adjusted taxable income calculation, effectively allowing deductions up to 30% of earnings before interest, taxes, depreciation and amortization (EBITDA). This provision is permanent.

Learn more about the technical changes to the business interest expense limit under section 163(j) and the implications for businesses.

What it means for insurance companies

Insurance holding companies that use intercompany financing should reassess how interest expenses are allocated and deducted under the new rules. The updated limitation may allow for greater deductibility, but it’s important to understand how this interacts with statutory accounting and surplus levels, which regulators use to evaluate financial strength.

This is particularly relevant for insurance brokers, which often grow through acquisition and may carry significant debt as a result. In some cases, choosing to capitalize interest expenses may help smooth taxable income across underwriting cycles or better align with the structure of reinsurance agreements.

Tax treatment of R&D expenses

The OBBBA makes domestic R&D costs fully deductible on a permanent basis, starting with 2025. Foreign R&D spending is still amortized over 15 years.

Qualified small businesses may be able to apply full expensing retroactively to accelerate deductions for expenses currently being amortized.

Learn more about the technical changes to the tax treatment of R&D expenses and the implications for businesses.

What it means for insurance companies

Insurance carriers and brokers investing in platforms for claims automation, underwriting, and actuarial modeling can now accelerate deductions for qualified domestic R&D. Immediate deductions for these investments, which are increasingly central to operational efficiency, may improve statutory and generally accepted accounting practices (GAAP) tax positions.

Insurers should assess how full expensing interacts with reserve calculations and long-term capital planning, especially in instances when platform development spans multiple tax years.

U.S. international tax reforms

American competitiveness: Tax rates for foreign-derived intangible income (FDII) and global intangible low-taxed income (GILTI) were initially designed to encourage U.S. companies to keep intangible assets and the associated profits within the United States. Together, they aim to balance American competitiveness globally with the federal government’s need for revenue.

The OBBBA maintains those concepts but modifies FDII and GILTI by:

  • Modifying the calculations to remove exclusions based on fixed asset investment and soften expense allocation requirements
  • Slightly increasing the corresponding effective tax rates (ETRs) and changing the foreign tax credit limitation
  • Renaming to foreign-derived deduction eligible income (FDDEI) and net controlled foreign corporation tested income (NCTI), respectively

Learn more about U.S. international tax reforms in the OBBBA.

What it means for insurance companies

Insurance companies with international operations should reassess how the updated U.S. tax rules affect their global tax position. Subpart F income is common in the sector, and the shift to FDDEI and NCTI changes how income and expenses are allocated across jurisdictions.

These changes may improve outcomes in some cases, such as reducing the impact of certain deductions, but they also require careful modeling to understand how they affect surplus levels, deferred tax assets, and reinsurance structures. Long-term planning should include evaluating global ETRs and considering whether adjustments to foreign entity structures could improve financial and regulatory outcomes.

Bonus depreciation

The OBBBA introduces significant changes to 100% bonus depreciation, making it permanent for most property acquired after Jan. 19, 2025, and establishing a new temporary allowance for qualified production property.

Learn more about the technical changes to bonus depreciation and implications for businesses.

What it means for insurance companies

Insurers investing in infrastructure-heavy subsidiaries—such as claims processing hubs or IT centers—can benefit from faster return on investment and improved financial reporting under statutory accounting. To fully capture these benefits, tax and finance teams should model how bonus depreciation affects reserve requirements and surplus levels, which are key indicators of financial strength used by regulators.

Additionally, insurers should evaluate whether these accelerated deductions influence the structure or economics of their reinsurance agreements or capital planning strategies. Cost segregation studies may offer additional tax advantages, especially for office buildouts and relocations.

Exclusion of gain on the sale of qualified small business stock

The OBBBA expands the gain exclusion rules for the sale of qualified small business stock (QSBS), mainly through the following three changes applicable to QSBS issued after July 4, 2025:

  • Provides a tiered exclusion: Allows taxpayers a 50% exclusion for shares held at least three years, a 75% exclusion for shares held at least four years, and a 100% exclusion for shares held at least five years.
  • Increases per-issuer limitation: Raises the per-issuer gain exclusion cap from $10 million to $15 million (indexed for inflation) while still leaving available the 10-times-basis limit if greater.
  • Increases corporate-level gross asset threshold for qualification: Increases the gross asset threshold from $50 million to $75 million (also indexed for inflation).

Learn more about the technical changes to the exclusions for small business stock and the implications for businesses.

What it means for insurance companies

Insurers that invest in insurtech startups—whether through venture arms or innovation programs—can benefit from new tax rules that make it easier to exclude gains when selling qualified small business stock. The updated thresholds and holding periods increase the potential for long-term returns. Insurance companies should evaluate how these changes could support their investment strategies and affect financial metrics, such as surplus.

Qualified business income deduction

The OBBBA makes permanent the QBI deduction at the current 20% rate. Certain pass-through entities are eligible. This was a temporary provision in the TCJA that was set to expire after 2025.

Learn more about the technical changes to the QBI deduction and the implications for businesses.

What it means for insurance companies

Insurance companies that operate as pass-through entities—such as mutual insurers or agency networks—may benefit from the permanent 20% deduction for qualified business income. However, eligibility depends on how their activities are classified. Functions like underwriting, claims processing, or actuarial services may fall into categories that limit access to the deduction.

To make the most of this provision, insurers should evaluate how their business activities are structured across entities. In some cases, restructuring these operations could help preserve eligibility for the deduction by avoiding classification as a disqualified service business. It’s also important to understand how the deduction interacts with reserve requirements and surplus calculations, especially in organizations with multiple entities.

SALT cap and PTET

The OBBBA raises the SALT cap to $40,000 beginning in 2025 through tax year 2029, after which it will revert to $10,000. The limitation is phased down for taxpayers with modified adjusted gross income (AGI) over $500,000 for the same period. Both the limitation and the modified AGI threshold are increased by 1% each year through 2029.

Meanwhile, the OBBBA makes no changes to the deductibility of PTET by a pass-through entity, what types of taxpayers can make state PTET elections, or the ability of taxpayers to make state PTET elections.

The final legislation omitted some proposals that would have severely restricted the ability of certain financial services businesses to benefit from PTET regimes. The omitted proposals could have had significant negative impacts on after-tax cash flows for business owners.

Learn more about the technical changes to the SALT cap and the implications for taxpayers.

What it means for insurance companies

Insurance companies structured as pass-through entities—such as mutual insurers or agency networks—continue to benefit from state-level PTET elections. These elections can provide meaningful federal deductions, especially in states with high premium or franchise taxes.

However, companies should evaluate how PTET elections interact with statutory surplus and reserve calculations, which are key to regulatory compliance. Additionally, the phaseout of the SALT cap for high-income individuals may reduce the benefit for executives and partners in these structures. Insurers should monitor state-level guidance to understand how PTET treatment applies in insurance-specific contexts.

Adapting to OBBBA changes: Next steps for asset management firms

OBBBA tax provisions represent significant opportunities for asset management firms, but they come with eligibility rules and planning considerations. Firms can work with their tax advisor to align their business objectives to OBBBA changes by taking the following steps:

  • Talk to your tax advisor to assess how business tax provisions align with your business objectives.
  • Review your capital investment, R&D and financing plans to align with the new incentives.
  • Model your tax position under the new rules to identify savings opportunities. Leveraging tax technology can enhance modeling precision, streamline compliance workflows, and improve visibility across capital; R&D; and federal, state and international tax positions—ultimately supporting more agile and informed decision-making.
  • In any transaction, work with an M&A specialist on either the buy- or sell-side when material attributes exist on the target’s balance sheet.

 

RSM contributors

Related insights

Navigate tax reform with confidence

The One Big Beautiful Bill Act contains tax changes that present challenges and opportunities. At RSM, our experienced tax professionals provide the insights and guidance you need. Connect with our team today to discuss how tax changes affect your business.

Explore our tax reform insights

Tax resources

Timely updates and analysis of changing federal, state and international tax policy and regulation.

Subscribe now

Stay updated on tax planning and regulatory topics that affect you and your business.

Washington National Tax

Experienced tax professionals track regulations, policies and legislation to help translate changes.

THE POWER OF BEING UNDERSTOOD

ASSURANCE | TAX | CONSULTING

RSM US LLP is a limited liability partnership and the U.S. member firm of RSM International, a global network of independent assurance, tax and consulting firms. The member firms of RSM International collaborate to provide services to global clients, but are separate and distinct legal entities that cannot obligate each other. Each member firm is responsible only for its own acts and omissions, and not those of any other party. Visit rsmus.com/about for more information regarding RSM US LLP and RSM International.

© 2025 RSM US LLP. All rights reserved.