The One Big Beautiful Bill Act (OBBBA) was signed into law on July 4, 2025. The OBBBA includes several provisions that directly and indirectly impact banks and financial services providers. At The Bonadio Group, we’re committed to helping our clients navigate this new landscape with clarity and confidence. Below is a comprehensive breakdown of the most critical provisions for the financial services industry, with actionable strategies for strategic consideration in the months and years ahead as we all navigate this new tax landscape.
Direct Impact on Financial Services Providers
Partial Exclusion for Interest on Rural Real Estate Loans:
A new 25% exclusion from gross income of interest on loans secured by certain rural or agricultural real property will impact the Effective Tax Rate (ETR) for banks that have significant agricultural lending. This provision is effective for calendar year public companies as of Q3 and applies to new debt incurred in 2025 for calendar year taxpayers.
Phase-Out of Clean Energy Tax Credits:
The early termination of many clean energy tax credits introduced under the Inflation Reduction Act (IRA) will diminish future incentives for banks to engage in clean energy projects. For new deals, there are key transition dates for the start of construction and placed in service that will now become critical as to whether any credit is allowed under the phase out transition rules. Further, President Trump issued an Executive Order directing Treasury to strictly enforce phase-outs of clean energy tax credits. Accordingly, any future Treasury guidance will likely not be favorable. While transferability is retained for applicable credits until they are phased out, Banks that invest in new deals going forward need to be especially careful with the transition rules.
Full Bonus Depreciation Restored:
The reinstatement of full bonus depreciation for assets acquired and placed in service on or after January 19, 2025 (replacing the previously scheduled 40% bonus depreciation), creates tax planning opportunities for banks. This change could significantly reduce taxable income, especially if the bank acquires qualifying assets like branch locations or makes qualified leasehold improvements (QIP). Banks retain the ability to elect out of bonus depreciation if desired.
Domestic R&E Expensing Restored:
Domestic research and experimental (“R&E”) expenses paid or incurred in 2025 will be immediately deductible for calendar year taxpayers. However, taxpayers may instead elect to amortize such costs over 5- or 10-year periods. Any R&E expenses incurred in 2022-2024 that were being amortized over 60 months under prior rules may be accelerated and deducted over a one or two year time period. These new provisions remove a disincentive for claiming R&E tax credits, since prior rules required the expenses identified as R&E to be deducted over 5 years.
Opportunity Zones/Low Income Housing Credits/New Market Tax Credits Made Permanent:
For Banks that invest in qualified opportunity zones, low-income housing tax credits (“LIHTCs”) and New Markets Tax Credits (“NMTC’s”), those incentives are made permanent under the OBBBA.
1% Charitable Deduction Floor: Corporate charitable contributions will only be deductible to the extent that they exceed 1% of a Bank’s taxable income effective in 2026 for calendar year taxpayers (the “floor”). The existing 10% “ceiling” limitation is also retained. Banks should consider the impact of both the floor and the ceiling in planning their charitable contributions going forward.
Foreign Remittance Excise Tax:
The OBBBA enacts a new 1% excise tax on foreign remittance transfers made after December 31, 2025. The excise tax provision excludes accounts held in certain financial institutions and transfers made under a credit or debit card issued in the US. Banks will need to analyze the provisions to determine whether remittances by their customers are excluded under the new rules.
Indirect Impact on Financial Services Providers
Boost to Auto Lending and Floor Plan Financing:
The deductibility of $10,000 of interest on domestic manufactured passenger auto loans for calendar year taxpayers for 2025-2028 will enhance the appeal of these financing arrangements. This change may benefit both banks and their dealership clients, potentially increasing demand for floor plan financing and related services.
However, the new deduction may also cause some information reporting headaches for banks. Presumably, the industry will lobby the Treasury for favorable guidance – Banks will want the manufacturer or dealer to certify that an auto qualifies as domestic (many are manufactured in more than one location) since Banks lack the expertise to determine this auto by auto. Also, Banks will have to track and report the deductible interest separately for information reporting purposes.
Full Expensing of New Manufacturing Facilities:
A full write-off for newly constructed manufacturing facilities (qualified production property) for which acquisition or construction begins after January 19, 2025, and which are placed in service after July 4, 2025, and before January 1, 2031, will spur capital investment. While this stimulates general lending activity, banks may also explore leasing arrangements, potentially through bank subsidiaries or affiliates, for clients who cannot use the full tax benefit.
EBITDA-Based Interest Expense Limitation Reinstated:
The limitation on deductibility of interest expense is permanently reverted to an EBITDA basis, rather than EBIT, which will improve the ability of borrowers to deduct interest expenses and could enhance bank loan activity by shifting client preferences back toward borrowing rather than leasing.
Section 179 Cap Increase:
The Section 179 deduction limit is increased to $2.5 million with a phasedown starting when the cost of qualifying property exceeds an inflation-adjusted $4 million and applies to calendar year taxpayers in 2025. This increase will encourage more small and mid-sized businesses to invest in capital equipment and generate more demand for loans or leases facilitated by financial institutions.
New Trump Savings Accounts:
New Trump savings accounts are created under which the government will contribute $1,000 per eligible child born between 2024 and 2028. The new Trump savings accounts may create a business opportunity for Bank wealth management departments.
CFBP Funding:
The law reduces the Consumer Financial Protection Bureau’s (CFPB) budget cap from 12% to 6.5% of the Federal Reserve’s operating expenses. While the agency retains the ability to request additional appropriations from Congress, its future operational capacity in light of funding and legal and congressional scrutiny remains uncertain.
Roth IRA Conversions:
Another potential impact on Bank wealth management departments is that they will need to advise customers about the indirect impacts of the OBBBA on Roth IRA conversions – since a spike in taxable income from such a conversion may now cause a taxpayer to lose the enhanced $40,000 SALT deduction and or the new senior $6,000 deduction.
What’s Next?
The newly enacted OBBBA creates many new tax provisions which will require Treasury to issue implementation guidance as the technical details and transition rules remain unclear. The Treasury Department is expected to issue regulations and interpretive guidance in the coming months to clarify eligibility, construction start definitions, placed-in-service requirements, and credit transferability during the wind-down period. Financial institutions involved in clean energy financing or tax equity investments should closely monitor forthcoming guidance, as it will be critical in determining the viability and compliance of new deals initiated during the transition window. As Yogi Berra once said, “It ain’t over till it’s over.”
In the meantime, Banks should begin modeling the impact of these changes now, particularly those involved in ag lending, auto finance, and R&D credit claims. If you need further guidance or have any questions on this topic, we are here to help. Please do not hesitate to reach out to discuss your specific situation.
This material has been prepared for general, informational purposes only and is not intended to provide, and should not be relied on for, tax, legal or accounting advice. Should you require any such advice, please contact us directly. The information contained herein does not create, and your review or use of the information does not constitute, an accountant-client relationship.
