President Trump Signs Major Tax And Spending Bill Supported By MSCI

On July 4, President Donald Trump signed into law the One Big, Beautiful Bill Act (OBBBA), legislation that includes substantial tax and spending cuts, along with an increase in the U.S. government’s borrowing limit. (Importantly, this increase will prevent the federal government from defaulting on its debt, a prospect that would have caused significant economic damage.) The U.S. House of Representatives had approved the massive, 887-page bill by a vote of 218-214 on July 2. The U.S. Senate approved it earlier in the week on a 51-50 vote where Vice President J.D. Vance cast the tie-breaking vote.

As Connecting the Dots reported last week, in the days leading up to the House and Senate votes, the Metals Service Center Institute and allies in the business industry sent several letters to lawmakers asking that they vote in favor of the legislation.

Regarding business taxes, as Holland and Knight explained, the OBBBA:

• Permanently extends the 20 percent Section 199A deduction for pass-through businesses;
• Increases Section 179 expensing to $2.5 million, with a phaseout threshold of $4 million, starting Jan. 1, 2025;
• Permanently extends 100 percent bonus depreciation for qualified property acquired and placed in service after Jan. 19, 2025;
• Creates a new 100 percent special depreciation allowance for nonresidential real property used in manufacturing that also provides full first-year expensing for qualified production property like factories or plants that are constructed or reconstructed between Jan. 19, 2025 and Jan. 1, 2029 and are put into service by Jan. 1, 2031;
• Restores the ability to permanently deduct research or experimental expenditures paid or incurred after Dec. 31, 2024, but only if those investments were made in the United States (small businesses, those companies with revenue of $30 million or less, can apply this change retroactively to expenditures after Dec. 31, 2021 while others can accelerate remaining deductions);
• Reinstates the limitation on Earnings Before Interest, Taxes, Depreciation and Amortization (EBITDA) after Dec. 31, 2024;
• Enhances the Advanced Manufacturing Investment Credit; and
• Beginning January 1, 2026, permanently increases the estate and gift tax exemption amount to $15 million for individuals and $30 million for married couples, with inflation adjustments thereafter.

For individuals, families, and pass-through businesses that pay their income tax through the individual income tax system, the OBBBA:

• Makes permanent existing tax rates and brackets and increases the standard deduction by $750;
• Increases the state and local tax deduction cap from $10,000 to $40,000 for the next five years;
• Provides temporary above-the-line deductions for tips ($25,000) and overtime pay ($12,500), but phases down the deduction based income levels;
• Provides a temporary deduction of up to $10,000 for car loan interest associated with vehicles as long as the final assembly of those vehicles took place in the United States; and
• Increases the child tax credit by $200.