One Big Beautiful Bill—One for the Businesses? Blog Series: Part 1
10.16.2025 Written by: Business Law Department

As you have likely heard, Congress and the Trump Administration signed into law the One Big Beautiful Bill Act (“OB3”) on July 4th, 2025, enacting a sweeping set of tax changes impacting individuals, estates, state, local, real estate, and business tax rules. While we know many of you have probably spent your first few weeks of fall reading all 330+ pages of the Act in your free time, we are launching this blog series to highlight a few key provisions that Minnesota business owners should know about.
Part 1 focuses on individual and pass-through provisions that affect business owners:
1. Qualified Business Income (“QBI”) Deduction
The QBI deduction was previously set to expire at the end of this year, potentially increasing taxes for many small-business owners. OB3 makes this deduction permanent. This means that eligible small businesses—structured as sole proprietorships, partnerships, S corporations, and LLCs—may continue to deduct up to 20% of their qualified business income.
2. Research and Development (“R&D”) Expense Deductions
Under OB3, U.S.-based R&D expenses are now fully deductible in the year incurred, reversing the previous requirement to amortize these costs over five years. This change is retroactive, allowing businesses to amend prior tax returns and claim deductions they were previously unable to take.
3. New Deductions for Tips and Overtime
For tax years 2025 through 2028, individuals in tip-based industries—with specific industry definitions still pending—may qualify for deductions up to $12,500 in tip income for single taxpayers, subject to income phaseouts and the requirement that tips be voluntary. Additionally, taxpayers who receive qualified overtime compensation—also awaiting regulatory definition—may be eligible for a deduction on the overtime portion of their wages, though not the full time-and-a-half compensation required under the Fair Labor Standards Act (FLSA). These new deductions come with numerous qualifying criteria and limitations, so further guidance is expected.
4. Pass-Through Entity Tax (“PTET”)
PTET is a tax on pass-through entities (partnerships, LLCs, or S corporations) that allows these entities to elect to pay an entity-level tax in exchange for a credit or deduction of the state tax imposed on the owners of the entities. OB3 extended PTET and increased the limit on the State and Local Tax (SALT) deduction cap to $40,000 annually for married couples filing jointly up from the current $10,000 annual cap. The $40,000 limit will be adjusted for inflation beginning in 2026 and increase by 1% annually until 2030. In 2030, the SALT cap is set to revert to the $10,000 deduction amount.
Conclusion
OB3’s individual and pass-through provisions offer significant opportunities for business owners, from permanent QBI deductions to immediate R&D expense deductions and new tip and overtime deductions. However, these changes also come with compliance complexities and qualifying criteria that require careful navigation. We strongly encourage you to consult with your CPA or tax advisor to understand how these changes may impact your specific situation.
Our team at Henningson & Snoxell, Ltd. is ready to help you assess the impact, make strategic adjustments, and keep your business compliant and protected. Contact us to discuss how OB3 may affect your legal planning and operations. Stay tuned for Part 2 of our series, where we’ll explore the business-specific provisions of the One Big Beautiful Bill.