The recently signed One Big Beautiful Bill (OBBB) introduces sweeping tax changes that could significantly affect construction businesses, energy developers, and investors.

What You Need to Know:

• Immediate Deductions for Capital Improvements: The OBBB restores 100% bonus depreciation for “Qualified Property” placed in service after January 19, 2025, and raises the Section 179 limit to $2.5 million.
• Pass-Through Deduction Made Permanent: Section 199A’s 20% deduction for pass-through entities stays in place, providing ongoing benefits for many contractors and subcontractors.
• Renewable Energy Credit Phaseouts: Credits for wind and solar projects will be eliminated for facilities placed in service after December 31, 2027 if construction begins after July 4, 2026. Certain credits for energy property and interconnection are eliminated even earlier.
• New Restrictions: Treasury Notice 2025-42 removes the 5% cost “safe harbor” test for renewable projects. As a result, developers must now meet the stricter physical work test.
• Opportunity Zones & Interest Deductions: Enhanced incentives for Qualified Opportunity Zones and expanded exceptions for business interest deductions.

Why it Matters:

Construction businesses and developers can benefit from accelerated deductions, but those involved in renewable energy projects, particularly solar and wind, face compressed timelines and new compliance challenges.

Next Steps:

If you’re planning capital improvements or renewable energy projects, now is the time to review timelines and financing strategies. Critical next steps include: 

• Identifying available tax benefits under OBBB
• Adjusting contracts and project schedules for compliance
• Mitigating risks from credit phaseouts and new restrictions

If you have questions on how the One Big Beautiful Bill impacts your business, contact Andrew Wells or Kenneth Rubinstein.