In our final installment of the One Big Beautiful Bill series, we turn to specialized investment and property provisions that could significantly impact specific types of business owners and investors. Part 3 explores three targeted provisions: enhanced benefits for small business stock investments, extended opportunity zone incentives, and new farmland sale options. While these provisions may not apply to every business owner, they offer substantial tax advantages for those who qualify.

1. Qualified Small Business Stock (“QSBS”)

QSBS is stock of a domestic C-corporation that has aggregate gross assets of less than $50 million when and immediately after the stock is issued. OB3 changed three key elements of QSBS: (1) shortened the required holding period from five to three years, with a phased-in exclusion amount for the holding period of between three to five years; (2) expanded QSB eligibility to C-corporations with gross assets not exceeding $75 million, adjusted annually for inflation; and (3) increased the flat cap, per issuer on the maximum amount of capital gain excludable from QSBS from $10 million to $15 million, adjusted annually for inflation.

2. Opportunity Zones (“OZ”)

OB3 permanently extends the OZ tax provisions of the Tax Cuts and Jobs Act (“TJCA”), which were set to expire at the end of 2026. Opportunity zones are designed to encourage people to invest in distressed areas to spur economic growth and job creation in low-income communities. A rolling 10-year OZ designation begins January 1, 2027. OB3 allows taxpayers to defer capital gains tax liabilities for five years from the date of investment, and they will receive a 10% exclusion of the original deferred gain. Among other things, OB3 also revised the OZ eligibility requirements and now includes enhanced tax incentives for investments in Qualified Rural Opportunity Zones. Investments in these rural OZ will receive a 30% exclusion of the original deferred capital gain after a 5-year holding period.

3. Sale of Farmland Property

For tax years beginning in 2026, OB3 allows taxpayers to elect to pay gain from the sale or exchange of qualified farmland to qualified farmers over four equal installments even if the total proceeds are received in a single tax year. Taxpayers can make this election by the due date of the initial tax return. Qualified farmland must be located in the United States and must have been used as a farm for the previous 10 years and must be subject to farm use restrictions for the next 10 years. Qualified farmers are individuals engaged in farming.

Conclusion

These specialized provisions in the One Big Beautiful Bill demonstrate Congress’s focus on supporting specific economic sectors through targeted tax incentives. From enhanced QSBS benefits that make small business investments more attractive to permanent opportunity zone extensions that encourage investment in underserved communities, these provisions create new planning opportunities for qualifying taxpayers. The farmland sale provision particularly benefits agricultural communities by providing installment payment options that can help manage tax burdens.

While these provisions may not apply broadly, they represent significant opportunities for those who qualify. However, these changes also come with compliance complexities and qualifying criteria that require careful navigation. As we conclude our three-part series on the One Big Beautiful Bill, we encourage you to work with your tax advisor to identify which provisions may benefit your specific situation and to develop strategies that maximize these new opportunities.

Our team at Henningson & Snoxell, Ltd. remains available to help you navigate these complex changes and optimize your business planning in light of OB3’s comprehensive reforms.

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The One Big Beautiful Bill (“OB3”) takes a dual approach to business taxes: enhanced deductions for business investments paired with stricter limits on loss deductions. OB3 introduces expanded bonus depreciation and doubled Section 179 limits for equipment and property purchases, while also implementing permanent caps on excess business losses and modifying interest deduction calculations.

Part 2 of our blog series on OB3 focuses on business investment and loss limitation provisions:

1. Bonus Depreciation for Qualified Property

Bonus depreciation has been reinstated for certain new qualified property—including equipment, vehicles, and software—acquired after January 19, 2025. At the federal level, businesses may deduct up to 100% of the cost of qualifying property in the year of acquisition. However, Minnesota does not conform to this federal provision, so the full cost may not be deductible on your Minnesota return.

2. Expensing Limits under IRC Section 179

Section 179 allows businesses to expense personal property and certain qualified real property up to a set limit. OB3 increased the maximum deduction limit from $1 million to $2.5 million. Additionally, the phase-out threshold was increased from $2.5 million to $4 million. These limits will be adjusted for inflation. This applies to property placed in service in taxable years beginning after December 31, 2024.

3. Business Interest Deduction Limitation

IRC Section 163(j), beginning after January 1, 2022, limited interest deductions to 30% of taxable EBIT (Earnings Before Interest and Taxes) for certain businesses. OB3 modifies this limitation by reverting the calculation from Taxable EBIT back to taxable EBITDA (Earnings Before Interest, Taxes, Depreciation, and Amortization) for tax years beginning after December 31, 2024, which will allow more interest to be deducted. For tax years beginning after December 31, 2025, OB3 makes additional changes, including modifying the definition of interest included in the calculation. The revised provision will require taxpayers to include all interest, even capitalized amounts, in the total interest amount when determining the interest limit.

4. Excess Business Losses

The Tax Cuts and Jobs Act (“TCJA”) limited the deductibility of excess business losses for noncorporate taxpayers (including individuals who own a business, trusts, and estates), a limitation that was set to expire in 2028. OB3 made this limitation permanent. An excess business loss is the amount by which the total deductions attributable to all of a noncorporate taxpayer’s trades or businesses exceed their total gross income and gains attributable to those trades or businesses. In other words, if your business losses exceed your business profits by more than a certain limit ($626,000 for married filing jointly or $313,000 for singles in 2025), the excess loss beyond that limit is treated as excess business loss. Any disallowed losses carried over to the next tax year will be treated as net operating losses rather than excess business losses.

Conclusion

OB3’s business provisions create new opportunities for investment-focused deductions while establishing permanent limitations on business loss utilization. These changes will require business owners to adjust their tax planning strategies to navigate the updated depreciation benefits, Section 179 limits, and loss restriction rules as they plan for 2025 and beyond. However, these changes also come with compliance complexities and qualifying criteria that require careful navigation. We encourage you to meet with your CPA or tax advisor to discuss planning strategies that work best for your specific situation.

As always, Henningson & Snoxell, Ltd. is here to help! Contact us with questions about how OB3 impacts your business. Be sure to check back for our final installment of the One Big Beautiful Bill series, where we will wrap up the key takeaways and planning considerations.

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