From OBBBA tax provisions to middle market investment decisions

Three business tax provisions in the One Big Beautiful Bill Act (OBBBA) influence what middle market companies invest in, how they finance it and where they conduct research:

• Full, immediate write-off for equipment and property (bonus depreciation): Businesses that buy qualifying equipment, machinery or technology can deduct 100% of the cost in the year the assets are put to work rather than over their useful life. This provision is now permanent, allowing middle market companies to plan around it.
• Faster write-off for U.S. research (IRC section 174): When businesses develop products or software in the U.S., they can deduct the full cost of research and development (R&D) activities right away rather than a little at a time over five years—lowering the current year’s tax bill and freeing up cash sooner.
• More room to deduct interest (IRC section 163(j)): Companies that borrow to fund the business can now write off more of their interest costs each year, which lowers the after-tax cost of debt.

The findings of RSM's Q2 2026 Middle Market Business Index (MMBI) survey suggest companies are already incorporating the effects of these provisions into their investment and planning decisions.

Among executives familiar with the OBBBA, 59% plan to increase capital investment over the next three years due to the provision allowing for more immediate write-offs, known as bonus depreciation.

For many companies, the appeal goes beyond the tax deduction itself. The provisions may affect cash flow, financing and the economics of investment decisions.

“As a result of the OBBBA, companies are involving us in the planning phase of their projects rather than waiting until after they make strategic decisions and are simply trying to get cash back,” says Ashley Zega, RSM partner in the federal credits and incentives practice at RSM US.

How OBBBA is accelerating capital expenditure and project timelines

The OBBBA is influencing whether middle market companies invest—and when they make those investments.

Among executives who indicated they plan to increase capital investment over the next three years because the OBBBA restored full bonus depreciation, two strategies appear widely embraced. Executives estimated that 58% of the increases will be accelerated planned investments, while 42% will be new investments not previously planned.

“Companies are pulling forward items on their five-to-10-year plan into the next one to three years,” says Zega. “They’re asking, ‘How can we move it forward and then do it faster?’ The OBBBA affected the corporate checkbook, but it also affected their calendar.”

Moving an investment forward changes more than the expected tax benefit. Companies may need to reconsider the sequence of projects, the cash and financing available to support them, and their capacity to execute several initiatives on a compressed timeline. Modeling those effects can help determine which investments to accelerate and which should remain on their original schedules.

Permanent 100% bonus depreciation: Long-term effects on capital planning

Now that the OBBBA made 100% bonus depreciation permanent, companies have greater visibility into the tax treatment of qualifying investments. They can build the immediate write-off into multiyear capital plans without worrying about the benefit phasing out.

That assurance gives companies more flexibility over the timing of capital investments. They can make purchases when the business needs them, while accounting for the tax benefit as they weigh competing demands for capital.

While the tax benefit may improve the economics of an investment, it does not determine whether or when a company should proceed. Companies can weigh the benefit alongside the business case, then invest when the project and the organization are ready.

Section 174 R&D expensing: How U.S. vs. offshore location affects cash flow

The OBBBA provision that allows faster write-offs for U.S. research costs can improve near-term cash flow and reduce the after-tax cost of innovation. It also gives companies another reason to examine where their research and software development take place.

The opportunity extends beyond traditional laboratory research. Large enterprise resource planning (ERP) implementations, for example, can involve substantial software development. Qualifying costs may be deductible immediately, and some activities may also qualify for the R&D tax credit, Zega says.

Location matters because the immediate deduction applies to domestic research activities. The OBBBA did not address costs for R&D conducted outside the United States, so their tax treatment became less favorable by comparison.

For companies evaluating domestic and offshore locations for research and software development, the different tax treatment of costs can affect projected cash flow and the availability of capital for other priorities.

Section 163(j) interest deductions: Optimizing debt and financing costs

The law’s more generous interest deduction helps companies that borrow to support growth. How much it helps depends partly on the cost of debt, which is substantially higher than it was when this same favorable provision was last in effect, from 2018 through 2021.

“That gap is the point companies most often miss when they don’t go through a modeling exercise,” says Ryan Corcoran, an RSM partner in the Washington National Tax accounting methods and periods practice. “The change helps, but not as much as you might remember,” he says.

The benefit of the deduction does not exist in isolation. Interactions with other provisions—including R&D-cost and depreciation incentives—can affect tax outcomes in ways that are not always intuitive.

Modeling the after-tax value of the larger interest deduction within a broader financing plan can help businesses determine whether additional debt strengthens the economics of a growth initiative or whether capital is better deployed elsewhere.

Why tax and finance teams must model OBBBA tax provisions together

Each of the three tax provisions pays off on its own. Evaluating the provisions together can produce very different results than evaluating each one separately because they affect both the timing of tax benefits and the broader calculations that determine after-tax returns.

For instance, how a company handles its research costs can affect the amount of interest it can deduct.

"This planning creates additional planning," says Corcoran. "The decision tree starts to branch."

Some OBBBA-related decisions simply involve a different tax treatment of activities a company is already undertaking. Others require changing how a business operates, such as where research happens, how a purchase is financed or when a project begins.

Additionally, a federal tax saving doesn't always translate into cash on hand. Many states treat these provisions differently, and some deductions may reduce future taxes without freeing up cash today.

That is why many companies model the provisions together rather than separately: An integrated analysis can show what a decision costs after tax, how financing changes the result and how today's choice affects future options.