Understanding the One Big Beautiful Bill: Implications for American Manufacturing
The One Big Beautiful Bill (OBBB), enacted on 7/4/25, represents a comprehensive legislative initiative that’s poised to influence the landscape of American manufacturing. This bill introduces a range of policies that aim to support domestic production, competitiveness and resilience of the U.S. industrial base. Below, we highlight several key tax provisions expected to influence investment in American manufacturing:
Bonus Depreciation Reinstated
The reinstatement of 100 percent bonus depreciation for qualifying tangible property, such as machinery and equipment, allows businesses to immediately deduct the full cost of these assets if placed in service after 1/19/25. This provision can impact cash flow, potentially encouraging companies to invest in modernization and expand their production capacity.
Immediate R&D Expensing
Similarly, the immediate expensing of U.S.-based research and development (R&D) costs for amounts paid or incurred after 12/31/24, including retroactive relief for small and medium-sized enterprises, aims to influence innovation and technological development.
Equipment Costs: Section 179 Cap Increase
Additionally, the increased Section 179 expensing cap — now up to $2.5 million, with a $4 million phase-out threshold — offers another avenue for businesses to deduct the cost of equipment.
New: Full-Cost Deduction on Qualified Production Property
A notable feature of the OBBB is the introduction of 100 percent depreciation specifically for qualified production property (QPP). (Click here for more details on qualification criteria.) This provision allows manufacturers to immediately deduct the full cost of new nonresidential real property — i.e., any permanent structures — if the property is used as an integral part of what the OBBB deems “qualified production activity” in the United States. This includes the construction of new factories, the expansion of existing production facilities, or significant improvements directly related to the manufacturing, production, or refining of tangible personal property. The ability to expense the entire cost of such properties in the year they are placed in service can affect a company’s financial planning and investment decisions regarding physical infrastructure.
Supply Chain Focus and Strategic Investments
The OBBB emphasizes strengthening domestic supply chains. The bill includes provisions intended to incentivize reshoring production and prioritizing U.S.-based sourcing, which could reduce reliance on foreign supply chains.
Semiconductor Manufacturing
The OBBB modifies the Advanced Manufacturing Investment Credit (Section 48D) established by the CHIPS Act. While the credit’s expiration date for property whose construction begins after 2026 remains unchanged, the OBBB increases the credit percentage from 25 to 35 percent for property placed in service after 12/31/25. This credit applies to investments in facilities that manufacture semiconductors or semiconductor manufacturing equipment, aiming to spur domestic production of these critical components.
Energy Sector Adjustments
Regarding the energy sector, the OBBB implements changes to certain clean energy tax credits from prior legislation. Notably, it accelerates phase-outs for wind and solar projects and tightens domestic content rules, but it continues to support areas like nuclear and geothermal energy. It also extends the clean fuel production credit. These adjustments may influence investment patterns within the energy sector, potentially redirecting focus or altering the landscape for different energy technologies.
Overall Impact
The OBBB introduces a range of tax provisions and strategic investments that could significantly influence American manufacturing. By emphasizing domestic supply chains while altering the costs associated with capital investment and R&D, the bill is positioned to affect job creation, innovation and the overall competitiveness of U.S. industrial sectors. The ultimate impact, however, will depend on the broader economic environment and how U.S. businesses respond to these new incentives.
About the Author
Anthony Licavoli is the director of tax consulting and part of Rehmann’s manufacturing group, which boasts specialists with experience investigating and analyzing incentives for manufacturers. He may be reached at llicavoli@rehmann.com.
Rehmann is an MMA Premium Associate Member and has been an MMA member company since July 2006. Visit online: rehmann.com.