Description

On July 4, 2025, OBBBA was signed into law by President Trump. OBBBA permanently extends many provisions of the Tax Cuts and Jobs Act of 2017 that were set to expire at the end of 2025 and made several key tax reforms that will have a significant impact on M&A transactions. OBBBA is generally considered favorable for both buyers and sellers because it preserves or expands key tax provisions.

Under OBBBA, buyers will be allowed to immediately deduct 100% of qualified tangible and intangible assets through 2029, which from a buyer's perspective will enhance the appeal of an asset sale. Also, OBBBA's favorable treatment of qualified small business stock (QSBS) makes rollover equity transactions more tax efficient and thus these types of deals are likely to become more prevalent going forward. Some other notable changes impacting M&A transactions include bonus depreciation, research and development (R&D) expensing, business interest deduction, and the preservation of state pass-through entity tax regimes.

The final Act does not include the "revenge tax," which would have increased federal income tax rates on countries perceived to impose discriminatory taxes on U.S. taxpayers. Despite the omission of the revenge tax, OBBBA's provisions are less favorable for cross-border transactions. Some notable provisions that counsel and cross-border deal parties must consider are the increased scope of income for controlled foreign corporations (CFCs) that are subject to current federal income tax, the increased amount of foreign taxes that may be credited against net CFC tested income, and the termination of the requirement that interest expense and R&D expenditures be allocated against such income.

Listen as our authoritative panel discusses the important implications of OBBBA for companies contemplating a merger or acquisition and factors that deal counsel should consider when negotiating deal price, structure, and other key terms.