The One Big Beautiful Bill Act (OBBB), enacted July 4, reshapes the tax landscape for funds, managers, portfolio companies, and investors. While many provisions are favorable, the law introduces new modeling choices, timing considerations, and structuring opportunities that call for swift, informed action. Below is a practical briefing to help you prioritize what matters most—so you can protect after-tax returns and keep your reporting clean.

High-Impact Areas for Funds and Managers

Section 199A and SALT cap planning. The pass-through deduction under Section 199A is made permanent but remains unavailable for most investment and financial services activities. Meanwhile, the state and local tax (SALT) cap is made permanent, with a temporary higher threshold and, critically, no federal shutdown of pass-through entity tax (PTET) workarounds. PTET elections can be powerful—but they’re not one-size-fits-all. Model before you elect.

IRA energy credits phaseouts. OBBB curtails and staggers phaseouts/restrictions for multiple clean-energy credits. Transferability/refundability survive, so the credit transfer and tax equity markets should stay active near-term. Sponsors should reassess project pipelines, accelerate shovel-ready opportunities, and revisit underwriting assumptions.

Section 707(a)(2) clarity. The statute now makes clear that disguised sales and disguised payments for services can be recharacterized even without finalized regulations. Expect heightened scrutiny of fee waivers, carry structures, and cash-in/cash-out transactions. Align economics and documentation with substance.

GILTI/Subpart F pro-rata rules. A U.S. shareholder’s Subpart F and Net CFC Tested Income inclusion now applies if the CFC was owned at any time during the CFC’s taxable year. Treasury may allow a “closing of the year” election on dispositions, but managers should monitor ownership changes—especially in launch and fundraising phases.

Section 461(l) active loss limit made permanent. Disallowed losses continue to convert to NOLs that may offset future income. Model cross-year effects carefully.

Itemized deduction changes. Most investment-expense itemized deductions remain repealed (apart from investment interest), and a new cap effectively limits the value of itemized deductions for top-rate taxpayers.

“Trump Accounts.” New tax-preferred accounts for minors could expand retail investor participation in index-tracking mutual and exchange-traded funds—worth noting for product teams.

Portfolio Company Planning Priorities

Qualified Small Business (QSB) stock. Section 1202 gets more attractive: partial exclusions at three and four years, a higher exclusion ceiling, and a larger gross-assets threshold. PE/VC sponsors should revisit QSB eligibility in term sheets and cap tables—and confirm state conformity (e.g., California differences remain a factor).

Section 163(j) interest limitation. EBITDA returns to the ATI base for years beginning after 2024—good news for leveraged companies. From 2026, interest capitalization planning narrows and certain foreign inclusions are excluded from ATI. Consider accelerating interest-capitalization strategies in 2024–2025 where appropriate and re-model suspended interest carryforwards for 2025.

Bonus depreciation and Section 179. 100% bonus depreciation is restored for property placed in service after January 19, 2025; Section 179 expensing increases with higher phaseout thresholds. Evaluate acquisition timing, 743(b) adjustments, and purchase price allocations.

Downward attribution relief. Reinstating Section 958(b)(4) may reduce inadvertent CFC status and reporting for some structures beginning in 2026. Re-map global org charts and filing obligations.

Section 174A research expensing. Domestic R&D expensing is permanently back (with elective capitalization options); foreign research remains amortized. Transition rules allow catch-up for 2022–2024 amounts. Coordinate 174A elections with 163(j), bonus depreciation, and credit strategies to optimize ETR and cash taxes.

REIT flexibility. Higher TRS limits (25% of assets) add structuring room for real-estate heavy portfolios—useful for carve-outs and roll-ups.

New deductions for overtime and tips (2025–2028). Up to $12,500 single/$25,000 joint for overtime; up to $25,000 for qualified tips. Hospitality and service-oriented portfolio companies should prepare for added reporting and employee communications.

Investor-Focused Changes

Endowment tax. The 1.4% excise tax evolves into a tiered structure up to 8% for large university endowments (effective after 2025). Institutions may consider timing income/gains ahead of higher brackets.

What to Do Next

• Re-model fund and portfolio tax cases. Update 163(j), 174A, bonus depreciation, and SALT/PTET assumptions; refresh ETR forecasts and distribution waterfalls.
• Tighten documentation. Especially around Section 707 economics, fee waivers, and carry.
• Audit structure charts. Reassess CFC status, GILTI/Subpart F exposure, and REIT/TRS ratios.
• Coordinate federal–state planning. State conformity on QSB, PTET, and depreciation can swing results materially.
• Prepare investor communications. Explain practical impacts, elections, and timing windows.

Partner with Experienced CPAs

Need a steady hand to translate OBBB into action? If you’re searching for a certified public accountant, comparing Sarasota CPA firms, or simply wondering “CPA near me,” Cavanaugh & Co’s experienced Sarasota accountants are ready to help. Speak with a Sarasota accountant on our team to review your structures, model the new rules, and build a clear plan forward.