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One Big Beautiful Bill Act and telecom: Implications of tax changes

Telecom companies have new tax tools for innovation and growth

September 02, 2025
#
Telecommunications
Business tax Tax policy Federal tax Artificial intelligence

Executive summary: Tax relief for telecom companies

The One Big Beautiful Bill Act (OBBBA) gives telecom companies new tools to invest more confidently, finance more flexibly, and compete more effectively. More favorable tax deductions should improve cash flow, encourage innovation and infrastructure expansion, and support more flexible financing. Changes to qualified small business stock rules may attract earlier-stage investment into telecom ventures.

Meanwhile, U.S. international tax reforms may alter how telecom firms manage intangible assets and foreign earnings. These changes may prompt companies to reevaluate their global structures and IP ownership strategies to stay competitive and compliant. For a sector defined by infrastructure, innovation and global reach, the OBBBA offers opportunities to rethink strategy and unlock value.

Telecom 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 telecom companies.

Bonus depreciation

The OBBBA introduces significant changes to 100% bonus depreciation, making it permanent for most property acquired after January 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 telecom companies

Telecom companies routinely invest in high-cost infrastructure—fiber networks, data centers, transmission equipment—that qualifies for bonus depreciation. Making 100% bonus depreciation permanent gives telecom businesses an incentive to accelerate capital investment. By allowing immediate expensing of eligible assets, companies can reduce taxable income and free up cash to fund expansion or modernization.

The new temporary allowance for qualified production property may also benefit telecom firms involved in manufacturing or assembling network components domestically. Companies should evaluate their capital plans to identify assets that qualify for bonus depreciation and consider timing purchases to maximize deductions.

Tax treatment of R&D expenses

The OBBBA makes domestic research and development 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 telecom companies

For telecom companies investing in R&D to improve network infrastructure, develop new connectivity technologies, and enhance customer experience, making domestic R&D costs fully deductible should provide immediate tax relief and improve cash flow—especially for firms scaling up 5G, fiber, and edge computing initiatives. This change allows telecom businesses to reinvest savings into innovation cycles without waiting years to recover costs.

For qualified small telecom businesses, the ability to retroactively apply full expensing could unlock deductions for previously amortized R&D costs. That’s particularly valuable for startups and mid-sized firms developing proprietary software, hardware or service platforms. These companies should revisit their R&D accounting and tax positions to identify opportunities for accelerated deductions and improved liquidity.

Business interest expense deduction limitation

The OBBBA returns to the original Tax Cuts and Jobs Act 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 telecom companies

Many telecom companies rely on substantial financing to build out infrastructure, acquire spectrum and expand service coverage. Restoring the EBITDA-based limitation for interest expense deductions means these companies can now deduct more of their interest costs—which is especially beneficial for capital-intensive firms with large depreciation and amortization charges. This change improves after-tax cash flow and makes debt financing more attractive relative to equity.

For telecom businesses planning network upgrades or entering new markets, this provision may support more aggressive growth strategies. Companies should examine their financing models to assess how the expanded deduction affects their cost of capital and investment returns.

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 more than three years, a 75% exclusion for shares held more than four years, and a 100% exclusion for shares held more than 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 telecom companies

The introduction of tiered gain exclusions may make telecom startups and growth-stage firms more appealing to investors who want significant tax benefits without waiting half a decade. This is especially relevant for telecom ventures with shorter development cycles, such as software-defined networking, AI-powered customer platforms, or edge computing services. Investors can now realize substantial tax savings on earlier exits, which may encourage more capital flow into the sector.

The increased per-issuer cap and higher corporate asset threshold also expand eligibility for telecom companies that previously exceeded the limits due to infrastructure-heavy operations. Firms nearing or surpassing the old $50 million threshold may now qualify under the new $75 million ceiling, opening the door to tax-advantaged exits. Telecom executives should assess whether their corporate structure and growth plans align with QSBS eligibility to unlock potential tax savings for founders and investors.

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

Profit shifting and base erosion: The base-erosion and anti-abuse tax (BEAT) is a minimum tax designed to prevent large multinational corporations from avoiding U.S. tax liability by shifting profits abroad. The OBBBA permanently lowered the scheduled BEAT rate from 12.5% to 10.5% and eliminated the unfavorable treatment of certain credits that could be applied against regular tax liabilities after Dec. 31, 2025.

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

What it means for telecom companies

These reforms could reshape how telecom businesses think about global footprint, tax planning, and long-term strategy. For starters, telecom companies with cross-border operations—especially those managing intangible assets like software platforms, patents, or customer data—will need to reassess how the new NCTI and FDDEI regimes affect their global tax exposure.

The removal of exclusions tied to fixed asset investments and the softening of expense allocation rules may shift the balance in favor of retaining more intangible assets in the U.S. This could reduce the complexity and cost of managing IP across jurisdictions while still preserving competitiveness.

The slightly higher effective tax rates and changes to foreign tax credit limitations mean telecom firms will need to model their international structures carefully. Companies with significant foreign earnings should evaluate whether their current entity setup still delivers the intended tax efficiencies. For some, repatriating intangible assets or centralizing IP management in the U.S. may now offer better after-tax outcomes.

Adapting to OBBBA changes: Next steps for telecom companies

OBBBA tax provisions represent significant opportunities for telecom companies, but they come with eligibility rules and planning considerations. Telecom companies 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, whether you're expanding fiber networks, upgrading data centers, deploying 5G infrastructure, or investing in edge computing and AI-powered platforms.
  • Review your capital investment, R&D and financing plans to align with the new incentives. This includes evaluating spending on transmission equipment, software-defined networking, and proprietary service platforms.
  • 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— such as spectrum licenses, network assets or customer data platforms.
  • 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 international tax positions—ultimately supporting more agile and informed decision making for telecom executives.

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