Wilson Sonsini | The One Big Beautiful Bill: Tax Provisions in Final Legislation Impacting Domestic and Multinational Businesses

Important Changes for Technology and Life Sciences Industries

On July 4, 2025, President Trump signed H.R. 1, commonly known as the “One Big Beautiful Bill Act” (OBBB), into law.¹ OBBB was initially approved by the House of Representatives on May 22, 2025 (the House Bill),² followed by proposed changes that were released by the Senate Finance Committee on June 16, 2025 (the SFC Bill) and passed by the full Senate on July 1, 2025. OBBB permanently extends many of the tax provisions initially introduced by P.L. 115-97, commonly known as the “Tax Cuts and Jobs Act” (TCJA), and introduces significant U.S. federal income tax changes relevant to domestic and multinational businesses and their shareholders and investors.

This alert briefly summarizes the key highlights most relevant to businesses in the technology and life sciences sectors. For expanded coverage, please see our Wilson Sonsini alert here.

OBBB also significantly impacts the energy and climate solutions sector. For more coverage, please see this Wilson Sonsini alert.

Key Highlights of OBBB That Technology and Life Science Companies Need to Know

Enhanced Qualified Small Business Stock (QSBS) Provisions

OBBB materially enhances the qualified small business stock (QSBS) provisions by:

(1) phasing-in gain exclusion after three years of owning QSBS, with 100 percent gain exclusion after five years, replacing the strict five-year cliff under prior law;

(2) increasing the per-taxpayer gain exclusion to $15 million from $10 million (indexed for inflation)

(3) increasing the gross assets threshold necessary to qualify as a qualified small business to $75 million from $50 million (also indexed for inflation)

These rules apply to stock issued after July 4, 2025 (the date of enactment of OBBB).

Permanent Expensing of Domestic R&D Costs

OBBB allows taxpayers to expense (rather than capitalize) domestic R&D expenses paid or incurred in tax years beginning on or after January 1, 2025 (although foreign R&D expenses must be capitalized and amortized over 15 years). In addition, OBBB permits eligible small businesses to elect to retroactively expense domestic R&D costs paid or incurred beginning in tax years starting on or after January 1, 2022. Small businesses generally include any corporation or partnership whose average annual gross receipts for the past tax years do not exceed $31 million. Finally, OBBB permits all taxpayers who paid or incurred domestic R&D expenses between 2022 and 2024 to elect to deduct any remaining unamortized amount over a one-period or ratably over a two-year period (at the taxpayer’s election).

Increased Thresholds for Income Reporting on IRS Forms 1099

Thresholds for IRS Form 1099 reporting are increased as follows:

• IRS Form 1099-MISC or 1099-NEC (miscellaneous income and nonemployee compensation, respectively)—increased from $600 to $2,000 and indexed for inflation.
• IRS Form 1099-K (payment card and third-party transactions)—if the payments to any one person exceed $20,000 and 200 transactions in one tax year, increased from payments of $2,500 or more (for 2025) and $600 or more (beginning in 2026) in a tax year

No “Revenge Tax”

OBBB does not include Section 899 (the so-called revenge tax), which would have introduced a new income tax regime that targeted certain taxpayers associated with a “discriminatory foreign country” that imposes an “unfair foreign tax.”

Downward Attribution Eliminated for Most Taxpayers

OBBB restores Section 958(b)(4), which prevents “downward attribution” of stock ownership from foreign corporations to U.S. persons for purposes of determining when a foreign corporation is a “controlled foreign corporation” (CFC), reducing the number of “accidental” CFCs. Instead, OBBB introduces new Section 951B, which applies the CFC income inclusion rules to “foreign controlled U.S. shareholders” of “foreign controlled CFCs.” A foreign controlled U.S. shareholder is a U.S. person that owns more than 50 percent of a foreign corporation (the foreign controlled CFC) by vote or value, specifically taking into account downward attribution.

Tax Rates Set for Net CFC Tested Income (formerly GILTI), Foreign-Derived Deduction Eligible Income (formerly FDII) and Base Erosion and Anti-Abuse Tax (BEAT)

OBBB modifies and renames the global intangible low-taxed income (GILTI) and foreign-derived intangible income (FDII) regime established by TCJA, replacing GILTI with “net CFC tested income,” and FDII with “foreign-derived deduction eligible income” (FDDEI). OBBB raises the effective tax rate on net CFC tested income and FDDEI to 14 percent from 13.125 percent under current law, moving the U.S. international tax regime into closer alignment with Pillar Two. In addition, OBBB permanently increases the BEAT rate on modified taxable income from 10 percent to 10.5 percent.

Other provisions in OBBB include:

• extending tax deductions for domestic qualified business income for owners of certain pass-through businesses under Section 199A;
• extending and expanding bonus depreciation under Section 168(k);
• increasing the limitation on business interest deductions under Section 163(j);
• increasing the SALT deduction cap to $40,000, subject to phase-down; no limit on pass-through entity tax (PTET) workaround;
• permanently extending and expanding Qualified Opportunity Zone benefits; and
• pro rata allocation of Subpart F income.

If you have any questions about any tax provisions in the One Big Beautiful Bill or any other tax matters, please contact Myra Sutanto Shen, Greg Broome, Derek Wallace, Jonathan Zhu, or any member of the Tax practice at Wilson Sonsini.

Rob Sherrill and Jackie Au contributed to the preparation of this alert.

Compliments of Wilson Sonsini – a member of the EACCNY