One Year After the One Big Beautiful Bill Act
One Year After the One Big Beautiful Bill Act:
What Taxpayers Should Know
It has been about a year since Congress enacted the One Big Beautiful Bill Act (OBBBA), one of the most significant tax laws in recent years. While many of its provisions became effective immediately, taxpayers and tax professionals have spent the past year waiting on IRS guidance, Treasury implementation, and state conformity legislation to answer the inevitable questions.
Over the past several months, much of that uncertainty has been resolved. North Carolina has updated its tax laws to conform with many of the federal changes, the IRS has released additional guidance on several key provisions, and implementation of new programs created by OBBBA is now underway. Below are several recent developments that may affect your tax planning and business operations.
North Carolina Clarifies Bonus Depreciation and R&E Rules
North Carolina recently updated its conformity to the Internal Revenue Code through July 5, 2025, providing long-awaited clarity on how several OBBBA provisions apply for North Carolina income tax purposes.
One area of uncertainty involved bonus depreciation. North Carolina still requires taxpayers to add back 85% of federal bonus depreciation and recover it over the following five years. However, after OBBBA permanently restored 100% federal bonus depreciation, North Carolina's statute still referenced the prior federal phase-down schedule, creating uncertainty over how the required addback should be calculated. The new legislation confirms the rules work as intended and eliminates the uncertainty that existed over the past year.
One significant difference remains. North Carolina does not conform to the new federal rules allowing immediate expensing of domestic research and experimental (R&E) expenditures. Businesses claiming the federal deduction generally must add back 80% of the deduction on their North Carolina return and recover it through deductions over the following four years. Businesses making retroactive federal R&E elections should also consider whether amended North Carolina returns are needed.
The legislation also provides additional interest relief for taxpayers affected by Hurricane Helene in designated disaster counties, primarily in western North Carolina. Eligible taxpayers may qualify for additional interest relief on certain North Carolina tax liabilities. If you or your business were affected by Hurricane Helene, please contact us to determine whether this relief may apply.
IRS Raises Mileage Rates
Due to higher fuel prices, the IRS made the unusual decision to increase the optional standard mileage rates mid-year, effective July 1, 2026.
Business: 76¢ per mile (up from 72.5¢)
Medical and military moving: 23.5¢ per mile (up from 20.5¢)
Charitable: 14¢ per mile (unchanged)
Employers using the IRS standard mileage rate to reimburse employees should ensure their reimbursement policies and expense reporting systems reflect the new rates.
IRS Online Accounts Become Even More Valuable
We've mentioned this before, but it's worth repeating: if you haven't created an IRS Online Account, now is a good time.
An online account provides secure access to tax transcripts, balances due, payment history, notices, estimated tax payments, and identity verification services. The IRS continues expanding its online services, making these accounts increasingly valuable for managing your tax affairs.
To get started, visit www.irs.gov/account.
Trump Accounts: Enrollment Is Underway
One of OBBBA's newest programs is the Trump Account, a tax-favored savings account for eligible children.
Eligible children born between January 1, 2025, and December 31, 2028, may qualify for the government's $1,000 pilot contribution. Families eligible for this one-time contribution should consider establishing an account even if they don't anticipate making additional contributions.
Enrollment is available at trumpaccount.com, by using the official Trump Account mobile app for Apple or Android devices, or by completing Form 4547 through the IRS website.
New Charitable Deduction for Nonitemizers
Beginning with 2026 federal income tax returns, taxpayers who claim the standard deduction may deduct up to $1,000 of qualifying cash charitable contributions ($2,000 for married couples filing jointly). This restores at least a partial federal tax benefit for charitable giving by taxpayers who do not itemize deductions.
IRS Notices May Take Longer Than Usual
The IRS continues to experience staffing reductions and budget-related processing delays. As a result, taxpayers sometimes receive automated notices after a payment has been made or correspondence has already been submitted.
Don't ignore IRS notices—but don't assume they're correct either. Contact us promptly so we can determine whether action is needed or whether the notice simply crossed in the mail.
Growing Beyond 50 Employees? Plan Ahead.
Employers approaching 50 full-time equivalent (FTE) employees should begin planning before crossing that threshold. The test is based on full-time equivalent employees—not simply headcount. Becoming an Applicable Large Employer (ALE) under the Affordable Care Act can trigger employer health coverage requirements, ACA reporting obligations, and potential penalties.
This milestone often catches growing businesses by surprise, particularly those administering payroll and employee benefits internally rather than through a third-party administrator. If your workforce is approaching this level, we'd be happy to discuss the implications before the rules take effect.
If you have questions about how any of these developments affect you, your family, or your business, please contact your MPC advisor. We're always happy to help.
