How the One Big Beautiful Bill Act impacts your business value and planning

If you are a business owner thinking about succession, estate planning, or gifting shares, the One Big Beautiful Bill Act (OBBBA), signed into law on July 4, 2025, brings significant changes that could affect your plans. While the bill covers a wide range of tax and spending policies, its most immediate impact for closely held businesses lies in how it reshapes the tax landscape and, by extension, business valuation and planning.

Here is what you need to know.

Why Cash Flow Still Reigns Supreme

At the core of any business valuation is cash flow. Specifically, the cash available to shareholders for reinvestment or distribution. This cash flow drives value, and the level of distributions can also influence the discounts applied to nonmarketable minority interests.

The OBBBA directly affects cash flow in several ways, and that means it directly affects how your business is valued for estate, gift, or income tax purposes.

TCJA Provisions Made Permanent

The Tax Cuts and Jobs Act (TCJA) of 2017 introduced several tax benefits that were set to expire at the end of 2025. OBBBA makes many of these provisions permanent, including:

• A 21% corporate income tax rate
• A 37% top individual income tax rate
• The Section 199A Qualified Business Income (QBI) deduction, which allows pass-through entities to deduct up to 20% of their QBI

This QBI deduction applies even to “specified service trades or businesses,” such as health, legal, accounting, and consulting firms.

Why it matters: Lower tax burdens for S corporation owners and partnership members increase the economic dividend they receive. That, in turn, reduces the cost of holding the asset during a nonmarketable period, often resulting in lower discounts in valuation.

Bonus Depreciation Expanded

OBBBA also makes bonus depreciation permanent and expands it to include buildings. This allows companies to take large upfront expense write-offs for capital investments, rather than depreciating them over time.

Why it matters: This change can influence the timing of fixed asset purchases and improve short-term cash flow, both of which can positively affect valuation.

More Favorable Interest Deduction Rules

The bill also changes how Adjusted Taxable Income (ATI) is calculated for purposes of interest deductibility. These changes allow businesses to deduct more interest upfront, reducing tax loss carryforwards and increasing near-term cash flow.

Why it matters: This is especially beneficial for asset-heavy, pass-through companies, which are among the biggest winners under OBBBA.

Changes to Capital Gains Tax Treatment

The Qualified Small Business Stock (QSBS) exclusion has been expanded:

• 100% of capital gains are excluded for shares held at least five years (up to $15 million in gains)
• 75% exclusion for four-year holdings
• 50% exclusion for three-year holdings

The $15 million cap is indexed to inflation starting in 2026. These rules apply only to C corporations in non-service industries, such as tech or retail.

Why it matters: For business owners planning to pass shares on to the next generation, heirs can take advantage of the expanded QSBS capital gains tax exclusions if they meet the holding requirements before selling their received shares, especially when the original owner’s cost basis was low. This makes QSBS a powerful tool for long-term, cross-generation estate and tax planning.

Estate and Gift Tax Exemption Increased

Perhaps the most impactful change for estate planning is the increase in the lifetime estate and gift tax exemption:

• $15 million for individuals
• $30 million for married couples

This exemption is indexed to inflation and begins in 2026. Without OBBBA, the TCJA provisions would have expired, and the exemption would have reverted to a base of $5 million (just over $7 million after inflation).

Why it matters: This larger exemption gives business owners more flexibility to transfer wealth tax-efficiently. However, it is important to remember:

• The exemption is a lifetime pool, covering gifts, estates, and generation-skipping transfers.
• The tax rates remain unchanged.
• Portability between spouses is still allowed.
• These changes apply only to federal estate tax; many states have their own rules.

Planning Implications

While OBBBA offers more predictability than past legislation, future changes are always possible. Many provisions were made “permanent”, but the reality is more nuanced. The bill passed by razor-thin margins and carries significant budget implications. Future administrations could revisit or reverse key elements. That is why proactive planning is essential.

Business owners who maintain a consistent, long-term estate planning strategy will be best positioned to take advantage of the current rules, and to adapt if the pendulum swings again.

Final Thoughts

The One Big Beautiful Bill Act is a landmark piece of legislation with real implications for business owners. It enhances cash flow, creates planning certainty, and reshapes how businesses are valued, especially for estate and gift tax purposes.

If you are considering a gift, sale, or succession plan, now is the time to consult with a qualified valuation professional and your estate planning team. A well-timed valuation can help you make smarter decisions, protect your legacy, and unlock the full value of your business.