Watson McLeish, senior tax policy expert for the U.S. Chamber of Commerce, and Dan Gerlach, economic advisor to the NC Chamber Foundation, recently joined a convening of the NC Chamber’s Tax Policy Committee to talk about the tax implications of One Big Beautiful Bill (H.R. 1).

They not only provided an update on the tax policy included in OBBBA, but they also gave tips on how North Carolina businesses can shape its implementation. Make sure to review the steps you need to take to make your voice heard at the end of this article.

Federal Focus: U.S. Chamber Perspective

The NC Chamber was part of a group of more than 500 associations, led by the U.S. Chamber of Commerce, calling on policymakers to pursue a pro-growth agenda and prevent any tax increases on American families or businesses.

Pro-growth tax policy that is permanent and brings certainty is critical during times of uncertainty around tariffs and other geopolitical events. Passage of the One Big Beautiful Bill Act avoids what would have been the largest tax increase in American history, which was set to occur when key provisions of the 2017 Tax Cuts and Jobs Act (TCJA) expired at the end of 2025.

While the legislation isn’t perfect, McLeish cited it as, “the best possible outcome from the business tax perspective.”

These highlights from the U.S. Chamber outline the top-five tax-policy wins in OBBBA.

1. Extension and Enhancement of Deduction for Qualified Business Income

While Congress permanently lowered the corporate income tax rate by 14 percentage points, from 35% to 21%, as part of the TCJA in 2017, the 20% deduction for qualified business income (QBI) was not permanent and would have expired at the end of 2025.

The OBBBA permanently extends the 20% QBI deduction, ensuring the long-term competitiveness of America’s business tax rates on firms of all types and sizes.

2. Full Expensing of Domestic Research and Experimental Expenditures

The OBBBA permanently reinstates the deduction for domestic research and experimental expenses paid or incurred in 2025 and beyond. It also generally permits business taxpayers with average annual gross receipts of $31 million or less to apply the change retroactively to 2022.

3. Increased Dollar Limitations for Expensing of Certain Depreciable Business Assets

The OBBBA permanently increased the maximum amount a taxpayer may expense under section 179 from $1 million to $2.5 million, reduced by the amount by which the cost of qualifying property exceeds $4 million. The $2.5 million and $4 million amounts are indexed for inflation for taxable years beginning after 2025.

4. Expansion of Qualified Small Business Stock Gain Exclusion

The qualified small business stock (QSBS) gain exclusion in section 1202 of the Code has been enhanced and expanded through a tiered gain exclusion for QSBS acquired after the date of enactment. The measure also expands eligibility for the exclusion by increasing both the per-issuer dollar cap from $10 million to $15 million and the corporate-level aggregate-asset ceiling from $50 million to $75 million, with both amounts indexed for inflation.

5. Enhancement of Employer-Provided Child Care Credit

Enhancements to the employer-provided child care credit in section 45F of the Code, incentivize businesses to invest in child care through building centers and operating or contracting childcare services. Section 45F previously provided businesses a nonrefundable tax credit of up to $150,000 per year on up to 25% of qualified child care expenses provided to employees.

The OBBBA permanently increased the employer-provided child care credit, created a separate credit amount for qualified small businesses, and indexed the maximum credit amounts for inflation. This policy is critical in our efforts to remove child care as a barrier to work.

For more detail on each of these provisions, read McLeish’s full analysis here. The U.S. Chamber has also provided this analysis, specifically for small businesses.

Bringing it Home: What This Means to North Carolina

There is a lot of policy in OBBBA and Gerlach reminds us to bifurcate it. The tax policy in OBBBA is simply the extension of policies advanced in 2017 that were set to expire. The extension of these policies is not the cause of health care programs or food aid being cut.

The big story in North Carolina, according to Gerlach, is the long-term potential challenge of expenses outpacing revenue. While our state is operating in a structural surplus now, we have the ability to make our tax climate more favorable through broader bases and lower rates. Gerlach attributes those policies to helping maintain our status as a top state for business but cautions what it brings in future years.

The current budget impasse means that spending increases and tax cuts are on hold, which builds revenues and masks the picture that will come into play once those funds are spent and those rates drop. Also of note is the shift of cost responsibility for Medicaid from the federal government to the state in OBBBA.

While North Carolina still has strong reserves in place, pressures on state finances will only continue to grow. Gerlach explained that two of our state’s largest financial responsibilities are education and health care. On the education side, there is little growth as we are now seeing the baby bust enter the state’s education system. However, on the health care side, North Carolinians are especially pressured the way OBBBA was structured.

Previously, there was a way to help the state finance its match of federal Medicaid dollars. Essentially, the state would assess a tax on hospitals, which becomes a cost the hospital can bill federal Medicaid to cover. That pulls down federal dollars to cover a portion and the hospital increases its rate to cover the rest and make them whole. The federal government has put a stop to that process by capping it in OBBBA, cutting into the way that North Carolina was financing Medicaid expansion. Additional administrative burdens there and with SNAP recipients creates financial pressure that was not there prior to OBBBA.

A healthy rainy-day fund has been critical to our state’s strong financial position. However, recent circumstances have caused significant drawdowns of that fund, including Helene recovery and economic development incentives, like those provided to JetZero. Decision makers continue to review additional revenue generators, like gambling, albeit on life support, because of the financial offsets they could create.

North Carolina is in a better position than many states from Gerlach’s perspective. Some states simply conform to federal tax policy and will have to factor OBBBA’s changes to stop collecting tax on tips, overtime, and more into their revenue picture. The N.C. General Assembly has the power to tax, so we are not in that position.

Summing it Up – And What You Can Do Now

Dan Gerlach said it best – we need to bifurcate the financial picture.

First and foremost, OBBBA made critical pro-growth tax policy permanent. Preventing the expiration of these existing policies will have a significant impact on your business, as well as our national and state economy. As OBBBA is used as a political football, it is important to remember the importance of tax policy that allows you to invest in your business and its people. It is also important to remember that the U.S. Department of the Treasury is now working furiously to issue guidance and make updates to manuals and forms so that taxpayers have certainty in the process.

McLeish explained that, “a lot needs to happen for taxpayers to realize the benefits that Congress intended.” This cannot all happen at once and expediency will likely drive a lot of soft guidance. While not ideal, that provides you, the taxpayers, with an opportunity to influence the implementation process. Now is the time to share with us your questions, any unintended consequences of the new policy, and technical corrections that you want made.

Click here to give us your feedback so we can help identify the biggest priorities in implementing this new tax policy.