Baker Tilly experts outlined key tax strategies for individuals and businesses navigating changes enacted by the One Big Beautiful Bill Act (OBBBA). Panelists at a December 11 webinar hosted by the firm offered advice on strategic planning, compliance, and financial modeling in the wake of the new law, which permanently extended several existing provisions while introducing new credits and deductions.
Enacted in July 2025, the OBBBA makes many of the individual and business tax cuts from the 2017 Tax Cuts and Jobs Act (TCJA) permanent, preventing a scheduled reversion to higher pre-TCJA rates.
For businesses, the Act restores and makes permanent several key provisions, most notably the immediate expensing for domestic research and experimental (R&E) expenditures and 100% bonus depreciation. However, the legislation also scales back some of the clean energy incentives established by the Inflation Reduction Act (IRA), especially for wind and solar projects.
Proactive Strategic Planning
The Baker Tilly panel, comprised of experts in the firm’s credits and incentives and financial advisory practices, emphasized that taxpayers must engage in early and comprehensive strategic planning to maximize benefits. This is especially true for state and local incentives, which often require action before a project is publicly announced.
Director Gabriel Sermeno noted that businesses considering relocating a facility to a different state can trigger several incentives, such as those for “new equipment, new buildings,” and “infrastructure improvement.” But companies should allot “at least three” months “at the bare minimum, if not six or more” for reaching out to states as part of a thorough location analysis.
“It’s important to get ahead of that and make sure that we’re not calling them the day before we’re going to put a shovel in the ground, because they’re going to be less inclined to provide incentives to a project that they feel has already made a decision,” Sermeno said. He advised creating an internal project team with representatives from finance, tax, human resources, and the C-suite, to ensure incentive eligibility.
This proactive stance is also critical for federal credits. Senior Manager Colin Quill reminded taxpayers of the tight timelines for new clean energy credits. Phaseouts of solar and wind credits in particular were “really accelerated, he explained,” as developers “have to begin construction … before July 4, 2026.” Facilities should be placed in service by January 1, 2028.
For businesses involved in manufacturing, Managing Director Jarrid McAuliff recommended planning around the new qualified production property (QPP) rules, which allow for accelerated depreciation. “[P]roperty that would otherwise be required to be depreciated over 39 years for tax purposes could be fully expensed in Year One, to the extent that it is integral and directly related to manufacturing or production process that meets certain requirements,” McAuliff stated.
He cautioned, however, that this “integral part test” specifically excludes ancillary areas like offices, restrooms, and lobbies.
Compliance Risks
With new opportunities come new compliance risks, and the panel warned that the IRS is increasing its enforcement efforts. The transferability of federal tax credits, a feature of the recent IRA and modified by the new law, is a key concern. Quill warned that while the IRS registration portal verifies a project’s existence, there is no “certification by the IRS as to the value of the credits or the amount,” meaning “there’s still that audit risk on the back end after you transfer them and then claim.”
This risk is compounded by new foreign entity of concern (FEOC) rules. Quill affirmed that taxpayers should “go down your supply chain [and] look at where your manufacturing material is coming from.”
“If it’s coming from an entity that’s directly tied to China, North Korea, Russia or Iran, that’s an issue,” which “could cause you to not get a credit at all,” Quill added.
Thorough documentation is the primary defense, the panel emphasized. For businesses claiming QPP expensing, McAuliff recommended conducting an “engineering-based cost segregation study to safely identify those parts of the building, components of the building, that are deemed integral and necessary for the production process.”
Modeling State and Federal Impacts
The experts advised that taxpayers must model the financial impact of various state and federal incentives to optimize their tax strategy. Managing Director Brad Elmer shared a case study of a $35 million historic redevelopment project in Kansas City where a holistic approach yielded substantial benefits.
“About half of it was financed through some type of credit or incentive,” he said, citing a combination of federal and state historic tax credits, a state brownfield credit, new markets tax credits, and a local property tax abatement. But he cautioned that the value of incentives varies by jurisdiction and timing, making detailed financial modeling crucial.
The interplay between federal and state rules also requires careful analysis, the panel agreed. Discussing the new rules for IRC § 174A, which allows for immediate expensing of domestic R&E, Director Diana Walker observed that not all states conform to the federal changes.
“[Y]ou also need to look into that and see what impact you could have there,” Walker advised. “For some states, you may still need to do [IRC § 174] analysis on the domestic side.”
Small businesses “should gather your documentation to support that you meet the requirement to be considered a small business under the OBBBA,” she continued. “And finally, make sure that you get with your tax advisor and plan for your return.”
For more on the transferability of certain energy credits, see Checkpoint’s Federal Tax Coordinator 2d ¶ L-17990. For the definition of a prohibited foreign entity, see Federal Tax Coordinator 2d ¶ L-18540. For immediate expensing of research and experimental expenditures under § 174A, Federal Tax Coordinator 2d ¶ L-3075.
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