On May 22, the House of Representatives passed H.R. 1, the One Big Beautiful Bill Act, marking a significant development in this year’s budget reconciliation process. This bill includes major proposed changes to a number of corporate tax credits that could impact businesses of all sizes.
While the House’s approval is an important step forward, the bill must still make its way through the Senate, where further negotiations and revisions are expected, before becoming law. As such, many of the provisions outlined below may still change.
Key Corporate Tax Credit Provisions in the Current House Version:
• Employee Retention Tax Credit (ERTC):
The bill proposes a retroactive cutoff date of January 31, 2024. It also includes longer IRS assessment periods and introduces new penalties targeting credit promoters.
• Paid Family and Medical Leave Tax Credit:
This credit would become permanent and feature updated calculation methods, along with changes to how state-mandated leave and employee classifications are handled.
• Domestic R&D Expenditures:
The amortization requirement for domestic research and development expenses would be suspended. Businesses could once again fully deduct qualifying expenses, including software development costs, from 2025 through 2029.
• Energy Tax Credits under the Inflation Reduction Act:
Several credits related to energy investment and production would be revised, though specifics remain under discussion.
• Credit for Employer-Paid Payroll Taxes on Employee Tips:
Beginning in 2025, the scope of this credit would expand to include more business sectors, with calculations tied to minimum wage standards.
• Employer-Provided Childcare Credit:
This credit would increase from 25% to 40% of qualifying childcare expenses (and up to 50% for qualified small businesses). The maximum annual credit would rise from $150,000 to $500,000 ($600,000 for small businesses), effective in 2026.
What’s Next?
Holmes & Associates, CPAs is closely monitoring the bill as it moves through the legislative process. We’ll continue to share updates and provide guidance once final details are confirmed and the bill is signed into law.
If you have questions about how these proposed changes may affect your business, feel free to contact us today.