One Big Beautiful Bill Act: What Tech and Life Sciences Companies Need to Know

As Congress debates the latest round of sweeping tax reform – dubbed the One Big Beautiful Bill Act (OBBBA) – employers across industries are watching closely. For companies in the technology and life sciences sectors in particular, the bill has significant implications, with a mix of potential tax relief and added complexity.

While the legislation is still moving through Congress, key differences between the House and Senate versions are emerging, particularly around provisions related to innovation incentives, AI regulation, and information reporting requirements. Some measures are designed as temporary stimulants, while others could reshape the tax landscape for the long term.  

Below, we have outlined some of the most relevant aspects of the bill and what they may mean for your business.

Immediate Expensing of R&E Costs Restored

Since 2022, companies have been required to capitalize and amortize domestic research and experimentation (R&E) expenses over five years and foreign R&E costs over 15 years, instead of deducting them immediately. This change hit startups and early-stage growth companies especially hard, and many found themselves with an unexpected cash tax burden.

Both the House and Senate versions of the OBBBA restore immediate deduction of U.S.-based R&E; however, there are currently two key differences:

• The Senate version proposes a permanent fix, offering long-term certainty for taxpayers.
• The House version allows immediate deductibility for only five years, creating a future cliff that would require affirmative legislative action to extend.

In addition, the bills differ on how they treat previously capitalized R&E costs:

• The House version would change this treatment prospectively, meaning that costs capitalized in 2022-2024 would continue to be amortized.
• The Senate version provides for retroactive application of the immediate deduction election. Certain small businesses would be able to amend prior year returns to take advantage of full expensing. All taxpayers (including small businesses that do not amend prior returns) are given the option to deduct unamortized costs from 2022-2024 over either a one-year or two-year period.

Notably, both versions retain the requirement to capitalize foreign R&E activities, which may limit the overall benefit for global companies.

A permanent fix could help innovation-driven businesses in the tech and life sciences sectors benefit from better cash flow and position them to reinvest in innovation with lower effective tax rates, but the final details will matter. 

R&E Tax Credits: More of the Same, But Harder to Claim

While the OBBBA mentions enhanced R&E credits for small businesses and startups, no meaningful changes have been made to the credit itself. Separately, the IRS has introduced stricter documentation and substantiation requirements – changes that are not part of the new bill but coincide with its timing. These heightened standards require taxpayers to provide more detailed technical data and contemporaneous records, increasing both the cost and complexity of securing the credit.

For companies in the tech and life sciences sectors – particularly those with software development or early-stage research activities – the credit remains valuable, but the burden of compliance is now significantly higher.

Bonus Depreciation Bumped Up to 100%

Bonus depreciation – which allows businesses to immediately deduct the full cost of qualified property in the year it’s placed in service – has been gradually decreasing since 2023. The House version restores 100% bonus depreciation for qualifying property placed in service after Jan. 19, 2025, and before Jan. 1, 2030, with the Senate version making the change permanent.

For tech and life sciences companies investing in lab equipment, manufacturing facilities, or IT infrastructure, the ability to fully deduct qualifying expenses in the year the property is placed in service will allow for significant upfront tax savings. It’s a cash flow win that can support ongoing capital expenditures and accelerate innovation efforts.

Interest Expense Limitations Loosened

Under current law, businesses must calculate their interest expense limitations based on earnings before interest and taxes (EBIT) – a shift that excludes depreciation and amortization. This change, effective for tax years beginning after Dec. 31, 2021, primarily affects businesses with average gross receipts exceeding $30M, making its impact on startups and early-stage companies minimal. However, for larger and more heavily leveraged organizations, this rule has significantly reduced the amount of interest expense that can be deducted as incurred.

The OBBBA proposes returning to a more favorable calculation by using the EBITDA-based limitation, allowing for the inclusion of depreciation and amortization in the computation of the base rate. This would increase the amount of deductible interest, offering meaningful relief to companies with debt obligations.

Capital-intensive companies in tech and life sciences – especially those relying on debt financing to fund infrastructure, manufacturing, or R&E – could see improved after-tax cash flow and greater flexibility for capital planning.

International Provisions in Flux

The House and Senate versions of the OBBBA have diverged sharply in their approach to taxation of foreign-derived income. The House proposal is more favorable to multinational businesses, which reduces U.S. tax on foreign earnings. The Senate version takes the opposite approach, potentially limiting or eliminating these deductions, raising the effective tax rate burden on foreign operations.

For globally active tech and life sciences companies, these provisions could have a material impact on how and where they invest in R&E, manage intellectual property, and structure cross-border operations. Strategic decisions around supply chains, licensing, and entity location may need to be revisited depending on the outcome of the legislation.

Guardrails for Digital Innovation: State Regulation Paused

For AI-driven biotech and FinTech-adjacent companies, the OBBBA’s proposed 10-year moratorium on new state-level regulation of digital services may bring a welcome dose of predictability. While the bill does not create any direct federal tax implications, it preempts new state laws – a move with potentially meaningful consequences for state and local tax (SALT) compliance. In practical terms, this means that states cannot create new digital services taxes specifically targeting AI tools, platforms, or services.  Any new tax must apply equally to AI and non-AI equivalents.

Cloud-based and software-as-a-service (SaaS) solutions have long existed in a state-by-state gray area, governed by varying rules regarding what constitutes a taxable digital service. For companies at the intersection of life sciences, AI, and digital infrastructure, this has created a patchwork of compliance obligations and legal uncertainty.

By temporarily halting the expansion of state-level regulation and digital taxes, the bill could simplify multistate compliance and reduce the risk of retroactive or conflicting tax rules. However, companies should remain vigilant: the moratorium applies only to new taxes.  Existing frameworks that remain in place will preserve the inconsistencies that currently create compliance challenges.

Form 1099-K Rule Adjustments

The OBBBA may also bring potential relief for FinTech companies through proposed changes made to Form 1099-K reporting requirements. Both the House and the Senate propose repealing the $600 de minimis threshold and restoring the previous threshold of $20,000 and 200 transactions per payee, per year.

This rollback would ease the reporting burden on payment processors, marketplaces, and peer-to-peer platforms that have been grappling with increased administrative costs and user confusion resulting from the lower threshold.

While this change does not alter the underlying taxability of income received through platforms, it significantly impacts information reporting obligations.

What Comes Next?

Heading into July, the One Big Beautiful Bill Act is still being negotiated in Congress. The final shape of the law – and whether key provisions become permanent or temporary – remains uncertain. However, if enacted, the bill could offer meaningful tax relief and regulatory stability for innovation-driven industries like technology and life sciences, particularly in areas such as current R&E deductibility, increased interest deductibility, 100% bonus depreciation, and digital compliance.

At the same time, companies should be aware of non-tax implications embedded in the broader legislative package. For instance, proposed reductions in Medicaid and SNAP funding may indirectly affect the life sciences sector by reducing patient access to treatments, which could complicate clinical trial recruitment and hinder the market adoption of new therapies.

Given the breadth and complexity of the proposed reforms, technology and life sciences companies should:

• Monitor final legislative developments closely;
• Evaluate the tax and financial reporting impact of key provisions, including any required adjustments under ASC 740;
• Align internal processes to meet evolving compliance and documentation standards (e.g., for R&E credits and 1099-K reporting); and
• Reassess strategic decisions around capital expenditures, debt financing, global structure, and digital operations.

Need help navigating the One Big Beautiful Bill Act and the changes it may bring? CBIZ is here to support tech and life sciences businesses through complex tax reform. Talk to our team today to get started.