Unlocking opportunities in the One Big Beautiful Bill. By Kellie Becker
H.R.1, commonly known as the One Big Beautiful Bill Act (OBBB), offers transformative tax incentives for manufacturers, and the legislation has the potential to significantly enhance a company’s cash flow while reducing costs. Although many of the law’s incentives appear straightforward at first glance, the real value lies in how manufacturers strategically apply them.
Following are four key areas where a thoughtful approach can unlock greater long-term savings and inform broader business decisions.
Thinking through R&D expensing
One aspect of the OBBB gaining significant attention is the ability to deduct all 2025 domestic research and development (R&D) costs on the current year’s taxes. While this may yield short-term benefits, it’s not always the most advantageous strategy. Expensing the entire R&D outlay provides a deduction, but no interest expense benefit. Conversely, capitalizing and amortizing R&D over multiple years may allow companies to maximize their interest expense deductions since amortization is added back when determining deductions for interest.
For example, if a manufacturer opts to capitalize $1m of R&D expenditures, it could increase its interest expense deduction by $300,000 in that year without adversely impacting interest deductions in future years. This approach could be particularly beneficial for companies with a substantial domestic R&D footprint and interest expense. However, this may not be the optimal choice if the manufacturer is already deducting all its interest expense. Other factors to consider include the company’s effective tax rate, overall profitability and where R&D expansions may occur going forward.
Reclassifying repair and maintenance
Similar to R&D decisions, manufacturers may benefit from capitalizing and depreciating repair and maintenance costs since depreciation deductions are added back when determining interest expense limitations while repair expenses are not. For every $100,000 capitalized, a company can claim 100 percent bonus depreciation, which could increase the interest expense deduction by $30,000. Depending on the company’s tax rate, this could generate tax savings of $10,000 or more.
For companies that spend millions on repairs and maintenance every year, this relatively simple adjustment can translate into a sizable return. Similar considerations apply to any rotable, temporary, or emergency spare parts and the capitalization of certain SG&A expenses.
Layering Section 179 and bonus depreciation
There are nuances between these two provisions, but generally both apply to tangible personal property such as machinery, equipment, office furniture, and certain non-residential real estate improvements. Section 179 allows 100 percent expensing up to $2.5m in 2025. However, if a company places more than $4m in assets into service, the Section 179 deduction begins phasing out. Bonus depreciation at 100 percent applies to assets acquired after Jan. 19, 2025; before that period in 2025 it would be 40 percent.
One advantage of Section 179 is that many states permit a Section 179 deduction, whereas most do not permit bonus depreciation deductions. By thoughtfully layering these incentives and aligning them with the appropriate timelines, manufacturers can significantly optimize their federal and state tax savings.
Taking advantage of real estate incentives
Although the above-mentioned strategies warrant careful consideration, decisions can be made in relatively short order after consulting with the company’s financial team and tax experts. They don’t generally take changes to operations of the business to maximize the benefit. Where things get more nuanced is around the newest accelerated depreciation available for manufacturing real estate through the Qualified Production Property provisions.
Real estate is an area that requires heavy investment and business planning. Business planning decisions – such as financing, permitting, site selection, lease options, and construction – are all interconnected and can significantly influence the optimal course of action. With numerous moving parts and tight deadlines, conducting a thorough cost-benefit analysis demands both time and specialized expertise. That said, in the right circumstances, the savings can be substantial. For example, a $10m investment in a brand-new facility, financed at a 12 percent cost of capital could generate net present value savings of $2.2 million at a 29.6 percent tax rate, which could help finance a sizable portion of a new facility’s construction costs.
The window of opportunity for these benefits is tight. New construction must begin after Jan. 19, 2025, finish by Jan. 1, 2029 and be placed in service by Jan. 1, 2031. The property must be new, located in the United States and used by the property owner as an integral part of a manufacturing process that substantially transforms tangible personal property. If a company prefers to purchase an existing facility, the building must be newly acquired by the taxpayer and can’t have been used in a manufacturing process by anyone from Jan. 1, 2021 through May 12, 2025.
Before taking advantage of the Qualified Production Property incentives, manufacturers should conduct a thorough evaluation to ensure that the ownership of real estate and these tax incentives align with the company’s broader business plans.
Moving beyond tax elections to business strategy
The OBBB offers meaningful opportunities for manufacturers, but unlocking its full value requires more than checking a box. With the right planning and perspective, these provisions can support smarter decisions that strengthen both near-term cash flow and long-term growth.
Kellie Becker
As the leader of Plante Moran’s national manufacturing and distribution practice, Kellie Becker leads an 800-person team serving more than 3,000 clients across several sectors, including automotive and mobility, food and beverage, plastics, metals, transportation, and logistics. Plante Moran is among the nation’s largest audit, tax, consulting and wealth management firms and provides a full line of services to organizations in the following industries: manufacturing and distribution, financial services, service, healthcare, private equity, public sector, real estate, construction and energy.