With the enactment of the One Big Beautiful Bill Act (OBBBA), attention turns from Congress to the Department of the Treasury and the Internal Revenue Service (IRS) as they develop administrative guidance to implement the bill. The bill's scope, magnitude, and speed of enactment, combined with relatively little legislative history and several retroactive effective dates, puts a priority on timely guidance. This week, we consider what guidance Treasury and the IRS are likely to prioritize given their limited resources.

Trump Campaign Tax Relief Proposals. Perhaps the greatest priority is developing guidance for Trump's marquee tax relief provisions – no tax on tips and overtime, the seniors deduction, and the deductibility of domestic car loan interest. These items top the list given the political desire to maximize and accelerate the bill's positive economic impact and the inherent complications of writing rules for provisions that are effective retroactively to the beginning of 2025. Not surprisingly, the IRS issued a fact sheet last week noting future transition relief for each of these provisions for 2025.

Retroactive Relief with Respect to Domestic R&E Expensing. In addition to providing permanent expensing of domestic research and experimentation (R&E) expenditures, the OBBBA also provides specific elective retroactive relief for expenditures capitalized between 2022 and 2024. Taxpayers need early administrative guidance to determine if and how they benefit from electing retroactive relief, as this election must be made in the first taxable year beginning after December 31, 2024.

Termination, Phase-Out, and Restrictions on Inflation Reduction Act Green Energy Credits. After the enactment of the OBBBA, the White House weighed in with a rather unique executive order directing Treasury action within 45 days to strictly enforce the termination of the clean electricity production and investment tax credits for wind and solar facilities, including the issuance of new and revised administrative guidance. 

International Tax Provisions. While perhaps not at the scale of comprehensive reform of international tax rules seen in the Tax Cuts and Jobs Act of 2017, the OBBBA contains significant changes to these rules that must be carefully layered atop the existing complex international tax statutory and regulatory regime. Guidance is needed to implement the changes that converts global intangible low-taxed income (GILTI) to Net Controlled Foreign Corporation (CFC) Tested Income and foreign-derived intangible income (FDII) to foreign-derived deduction eligible income (FDDEI), as well as guidance to explain how these provisions, as well as the base erosion and anti-abuse tax (BEAT) and section 163(j), operate and interact with one another.

With respect to these provisions and many others, we expect to see an initial round of sub-regulatory guidance (notices, FAQs, and Q&As) followed by a formal "notice and comment" regulatory process. We also wouldn't be surprised to see executive orders from the president that further direct the content and timing of particular OBBBA regulations. #TaxTake

In the News

Jorge commented in Tax Notes on some of the more particular tax breaks in the OBBBA: "Anytime you have a [legislative] vehicle that's large and sizable, you're going to have miscellaneous items be added." 

Marc was quoted in Fortune on the expanded state and local tax (SALT) deduction cap in Fortune: "It's increased relief, but it is temporary."

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