Top 10 Federal Tax Changes Birmingham Businesses Need to Know
Many businesses across the Birmingham region have had questions or concerns about the effects of the One Big Beautiful Bill Act (“OBBBA” or “the Act”). The Birmingham Business Alliance (BBA), in partnership with Bradley Arant Boult Cummings LLP, has prepared a summary of the changes especially relevant to most investors of the BBA.
Written by Bruce P. Ely, James E. Long, Jr. and William T. Thistle, II of Bradley Arant Boult Cummings LLP, the below is a summary of the provisions of the nearly 900-page (525 pages of tax-specific amendments) OBBA signed into law by President Trump on July 4. Most importantly, the Act avoided what would have been a $4 trillion tax hike if Congress had done nothing and allowed the Tax Cuts and Jobs Act of 2017 (“TCJA”) to expire.
The two key words here are “permanent” and “predictability”—the Act makes permanent the dramatic corporate tax rate reduction from 35% to 21% and most of the tax cuts contained in TCJA that would have expired on December 31, 2025. Second, the Act should allow your business and its advisers to reasonably predict the future now, federal tax-wise, allowing you to set budgets accordingly. The next frontier will be watching how the states – including the Alabama Legislature and the Alabama DOR – respond to these sweeping changes. We do not foresee Governor Ivey calling a special session this Fall to react to OBBBA, and thus it’s likely that any Alabama-specific changes will be addressed during the Spring 2026 regular session.
Because most of you have probably been inundated with OBBBA webinars, newsletters and media attention, we focus below on the “top 10” Alabama business-specific provisions of OBBBA, many of which are time-critical, knowing that we are taking only a 30,000-foot overview:
(1) 100% “bonus depreciation” for most depreciable assets placed in service after January 20, 2025 and now including a 100% deduction for certain U.S. real property used as an integral part of the manufacturing of tangible personal property (note the retroactive effective date).
(2) Immediate expensing of tangible personal property and “canned” computer software, up to $2.5 million annually, placed in service on or after January 1, 2025 (again, note the retroactive effective date).
(3) Immediate expensing of qualified research and experimentation (R&D) expenditures domestically and the ability to deduct the unamortized portion of qualified R&D expenditures made before January 1, 2025 (again, note the retroactive effective date).
(4) Business interest deductions increased to 30% of EBITDA, effective January 1, 2026.
(5) Effective January 1, 2025, the SALT cap is increased to $40,000 for married taxpayers filing jointly (“MFJ”) but with phase-outs beginning at $500,000 (MFJ). Thankfully, the final version of the bill deleted the “haircut” that previous versions of the bill would have imposed on deducting state pass-through entity (“PTE”) taxes, so that planning opportunity remains viable for owners of PTEs such as S corporations and LLCs in Alabama and most but not all the other states (some states have 12/31/25 sunset dates).
(6) For PTE owners, the temporary Section 199A deduction of 20% of “qualified business income” was made permanent and the phase-out thresholds increased.
(7) Qualified opportunity zones, new markets tax credits, and low-income housing credits are now permanent or enhanced.
(8) Charitable contributions by C corporations are limited – only deductions in excess of 1% of federal taxable income – and as before, the 10% cap remains in place.
(9) “Exemption” (really, a deduction) for employees receiving overtime wages – up to $25,000 annually for MFJ ($12,500 otherwise), with a phase-out beginning at $300,000 modified adjusted gross income (MFJ). Retroactively effective beginning January 1, 2025 and sunsets after December 31, 2028. Remember that the Alabama overtime pay exemption expired June 30, 2025. Employers will have to keep up with overtime pay and separately report it on the employee’s Form W-2.
(10) “Exemption” for qualified tip income reported via payroll – same deduction limits and phase-outs as with overtime pay but with specific criteria for what constitutes “tip income.” Also effective beginning January 1, 2025 through December 31, 2028.
Actually, there’s a third key word – “modeling.” Because many of these provisions are retroactive to specific dates in January of this year, while others are delayed until next year, businesses need to meet with their accounting firms ASAP, study the details of those provisions affecting your business, and decide which capital expenditures, hiring plans, etc. should be accelerated and which should be delayed until next year.
Obviously, the summary provided above is only that – each OBBBA change to the federal tax law has detailed qualifications and deadlines that must be taken into account. You should not rely on this summary as definitive tax advice but instead promptly seek advice from your tax professionals. Thank you for the opportunity to be of service to the BBA. If you wish to subscribe to our periodic email SALT Alerts and Federal Tax Alerts, please contact Laura Beth Allen at lallen@bradley.com. There is no charge.