With the passage of the “One Big Beautiful Bill,” businesses are now navigating one of the most significant tax law changes in recent years. While many headlines focus on the taxpayer-facing provisions—like increased deductions and credits—companies must also prepare for the accounting implications, especially in how they report the bill’s impacts in both interim and year-end financial statements. Here’s what you need to know.
Key Provisions Affecting Financial Reporting
The new tax law introduces several provisions that will impact on how businesses recognize and measure tax effects:
- Bonus Depreciation
The bill extends and enhances bonus depreciation rules, allowing businesses to immediately deduct 100% of qualified property placed in service after June 30, 2025.
Accounting Implication:
Under ASC 740, companies must record the effect of new tax rates and deductions in the period that includes the enactment date. If your company files quarterly financials, the accelerated deduction could impact third-quarter tax expense and deferred tax calculations. Make sure to reassess fixed asset schedules and deferred tax asset/liability positions accordingly.
- State and Local Tax (SALT) Deduction Cap
The law raises the SALT deduction cap for pass-through entity owners and expands the ability of PTEs to deduct state taxes at the entity level.
Accounting Implication:
Changes to SALT deductibility can affect estimated tax payments and state-level deferred tax assets and liabilities. Businesses operating in high-tax states should re-evaluate their PTE elections and update disclosures to reflect how these changes affect their effective tax rate and tax planning strategies.
- Overtime Deductibility
The new legislation allows for broader deductibility of overtime wages for certain industries and classifications.
Accounting Implication:
This provision may reduce taxable income, impacting current tax expense. However, the timing of when overtime is accrued versus when it’s deductible could also introduce temporary differences, affecting deferred taxes. Companies should ensure that payroll systems and accrual accounting processes are aligned to accurately reflect this change.
Timing: When Do These Changes Take Effect?
All tax effects of the bill should be recognized in the financial reporting period that includes the enactment date—July 4, 2025. For most calendar-year companies, this means the third quarter of 2025. Even if some provisions take effect later (e.g., beginning in 2026), companies must still recognize the impact of the law’s enactment in the quarter it was signed.
Disclosure and Transparency
Public companies will need to include expanded disclosures in their SEC filings, particularly under ASC 740 and ASC 855 (Subsequent Events), including:
- A description of the changes
- Estimated impacts on deferred taxes and effective tax rates
- Reconciliation of prior estimates versus actual post-enactment
Private companies should similarly update their tax footnotes and consider including supplemental information to help stakeholders understand the implications of the law.
Final Thoughts
The “One Big Beautiful Bill” represents more than just tax relief—it marks a shift in how companies need to account for income taxes. Proper timing, accurate calculations, and transparent reporting are critical to staying compliant and avoiding surprises during audits or financial reviews. If your business hasn’t already started evaluating the impact, now is the time to do so.
Need help navigating these changes? Our team is ready to assist with tax provision calculations, deferred tax analysis, and financial reporting updates.
