What’s in the “One, Big, Beautiful Bill” and how does it impact US taxpayers?

While the Bill isn’t complete—having only been introduced by the House Ways and Means Committee on May 12, 2025—the Republicans spent much of Tuesday and early Wednesday defending their proposals, it does give insight into what changes are in store for Canadian businesses with US operations.

Key proposals

Bonus depreciation

The initial draft of the Bill proposes reinstating 100% expensing (bonus depreciation) for qualified property acquired on or after January 20, 2025, and before January 1, 2030. There are also proposals to extend bonus depreciation to certain real property considered “qualified production property” used in a “qualified production activity”, such as manufacturing, production, or refining of tangible personal property.  

These provisions could be beneficial for taxpayers considering expansion in the US and/or operations in the US as the capital costs associated with such investments may be immediately deductible.

Under the TCJA taxpayers were allowed to deduct the cost of capital assets and other property used in their trade or business in the year of purchase via a “bonus depreciation” deduction, rather than claiming regular depreciation over the asset’s useful life. However, the bonus depreciation has been gradually phasing out 20% per year, with only a 40% deduction allowed in 2025 and 20% in 2026.  

Research & Experimental expenditures

The proposed tax changes introduced in the Bill provide some relief for taxpayers by allowing the immediate deduction of domestic research and experimental (R&E) expenditures paid or incurred in taxable years beginning on or after December 31, 2024, and before January 1, 2030.

However, the requirement to capitalize foreign R&E is likely to remain in place. If enacted, these changes would provide a substantial benefit to taxpayers that invest in US based developers and other research personnel and activities.  

Under the TCJA, taxpayers have been required to capitalize these expenses for US tax purposes and amortize them over five years for domestic R&E costs or 15 years for foreign R&E activities, since 2022. This change in law resulted in insignificant increases in taxable income for many taxpayers engaged in research and development activities.  

Interest deductibility

A proposed change in the Bill would reinstate the use of an Earnings Before Interest, Taxes, Depreciation, and Amortization (EBITDA) approach in calculating the interest expense limitation under IRC section 163(j) for tax years beginning on or after December 31, 2024, and before January 1, 2030. 

This change would reverse an unfavourable provisions of the TCJA, which reduced the interest deductibility threshold to 30% (from 50%) of adjusted taxable income and shifted the calculation basis from adjusted taxable income under an EBITDA approach to an Earnings Before Interest and Taxes (EBIT) approach. This provision currently limits interest deductibility for many taxpayers, particularly for those with significant capital asset additions eligible for bonus depreciation.  

FDII & GILTI deductions

The Bill proposed making the current 37.5% deduction for Foreign-Derived Intangible Income (FDII) and the 50% inclusion rate for Global Intangible Low-Taxed Income (GILTI) permanent. If enacted, this measure would result in significant savings for eligible taxpayers for FDII or subject to GILTI.

Under current law, these rates are set to change for tax years beginning on or after December 31, 2025. The FDII deduction is scheduled to drop to 21.875%, while the GILTI inclusion rate is set to rise to 62.5%, increasing the effective tax burden on foreign income.

Introduced under the TCJA, FDII and GILTI were designed to incentivize US companies to retain and develop intangible assets domestically. The FDII provision allows a 37.5% deduction on qualifying foreign-sourced income, effectively reducing the tax rate to 13.125% (from 21%). Conversely, the GILTI requires taxpayers to include 50% of certain income earned by foreign subsidiaries in their US taxable income, based on active foreign business operations.

Takeaway

The Bill proposes approximately $3.7 trillion in tax cuts over a 10-year period, with many provisions focused on President Trump’s tax agenda, which emphasizes bringing jobs, incentives, and businesses back to the US.

Following the discussions on May 13, 2025, the House is expected to vote on the Bill soon, with the goal of passing the bill by May 26, 2025. Given the narrow Republican majority, the vote is expected to be close. However, even if the Bill passes, the final outcome remains uncertain as the Senate must introduce, debate, and vote on its own version of tax legislation. The two bills would then need to be reconciled before a final bill can be sent to the President for signature.

The Republican party is aiming to have a final bill on the President’s desk for signature by July 4, 2025.

In light of these proposals, Canadian taxpayers with operations in the US should revisit their tax structures to evaluate potential tax implications. They should also consider how the provisions will impact any forthcoming Canadian tax reforms or tariffs that could affect their business.

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^Disclaimer 

^{The information contained herein is general in nature and is based on proposals that are subject to change. It is not, and should not be construed as, accounting, legal or tax advice or an opinion provided by Doane Grant Thornton LLP to the reader. This material may not be applicable to, or suitable for, specific circumstances or needs and may require consideration of other factors not described herein.}