After the passage of the “One Big Beautiful Bill Act,” family-owned businesses find themselves asking, “What’s next?”
As new elections stand on the horizon such worries as a new surtax on wealth, revisions of Death Tax rates, harmful tariffs, or just holding on to the wins gained this year, are ever present. But before we begin to focus on new priorities, let’s take a moment to digest the accomplishments earned for America’s largest private employer, family-owned businesses.
Top Five Wins
Let’s look at the top five (of many) big wins in the new bill.
The greatest worry family businesses had this year was a new tax bill raising the top income bracket beyond 37%. Some lawmakers talked about going beyond a 40% tax rate, with an additional tax on our highest income earners, commonly called a surtax on income.
Over 80% of family-owned businesses are pass-through organizations, that means paying at the very top tax rates, but not at all equal to corporations paying a low flat tax rate of 21%. Through our work educating lawmakers on Capitol Hill about this basic unfairness between the rate of tax on pass-through organizations vs corporations, we helped stop the top income tax rate from increasing. With the bill’s passage, the top tax rate remained unchanged, and is permanent, at 37%, until Congress decides differently.
The second win focuses on the Estate Tax, better known as the Death Tax. We’ve been fighting against the Death Tax for a long time. We’ve been fighting with our lawmakers on Capitol Hill to abolish it, but that’s been difficult.
But the good news is, with the passage of the bill we’ve been able to maintain and stop the Death tax rate from increasing. In fact, the Estate Tax lifetime exemption has increased to $15 million per person, from $14 million. This is now permanent, too, until it isn’t.
Wins from Capital Gains to R&D Expensing
As the voice for family businesses on Capitol Hill, we know Capital Gains taxes are always in the crosshairs of Congress. They’re always looking to raise taxes on Capital Gains, such as real estate, shares in companies, and the other valuable investments hard working family businesses make to invest in their futures.
With the new bill, assets held for one year or less, Short-Term Capital Gains, have rates from 10% to 37%, while Long-Term Gains, assets held over one year, have better rates, from 0% to 20%. Unfortunately for family businesses, corporations again get taxed at the much lower flat rate of 21%. With our work with lawmakers, we made sure Capital Gains tax rates held steady. There is now no increase to Capital Gains taxes. This is a big win.
Since 80% over family businesses are Pass Through entities, the one work-around our lawmakers came up with to level the playing field is something called the 199A provision. The provision offers an additional 20% tax break to Pass-Through entities, which helps. Going into 2025 there were discussions on Capitol Hill of changing this provision, of lowering it or changing it to the detriment of family businesses.
The good news is that Congress listened to us and the 20% deduction for Pass Through entities was made permanent in the One Big Beautiful Bill Act.
The fifth priority was to make sure Congress restores all R&D expensing so family businesses can write down, over time, the cost of expensive equipment and projects important to long term investing.
Working with lawmakers, the new tax bill now restores full expensing for domestic research and development costs starting in 2025, offering a welcome reversal of the Tax Cuts and Jobs Act’s capitalization requirement.
But it’s complicated and family business managers will need to know what domestic expenses are retroactive, what can be accelerated, and which ones can be amortized over the long term. No matter, the new R&D expensing provisions are a big win for family-owned businesses of all sizes. And, they are retroactive for eligible family businesses, which could unlock refunds for 2022–2024 returns.
No matter, the new R &D expensing provisions are a big win for family-owned businesses of all sizes. And, they are retroactive for eligible family businesses, which could unlock refunds for 2022-2024 returns.
Nothing is Permanent
Private foundations also face an escalating tax based on their size: 2.78% for private foundations with assets between $50 million and $250 million, 5% for entities with assets between $250 million and $5 billion; and 10% for foundations with assets of at least $5 billion, such as the Gates Foundation, a longtime target for Republicans. The bill also raises taxes to 5% on immigrants transferring money (remittances) to foreign countries and restricts health coverage tax credits.
If the tax bill doesn’t provide enough Capitol Hill drama, the Department of Treasury has let Congress know the so-called “X-Date” — the date the U.S. is expected to run out of money — will hit sometime in August.
Congressional Republicans are seeking to raise the debt ceiling to about $41 trillion as part of the tax and spending cut package or do away with the debt limit altogether. It should be noted that Treasury Secretary Scott Bessent is asking lawmakers to increase or suspend the debt limit by before the August recess.
Pat Soldano, President of Family Enterprise USA, and the Policy Taxation Group, both are non-partisan organizations advocating for family enterprises of all sizes. Both groups are organizers of the Congressional Family Business Caucus and of the Family Enterprise USA Annual Family Business Survey.
Family Business Alliance strives to help family businesses with the tools, resources, and connections to help businesses succeed. Learn more about our resources including Leading Forward, Succeeding in Succession, and Navigating Governance that help to advance family business in our community.
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