Game-Changing Tax Shifts Affecting Every C-Corporation

For C-corporations (regular corporations taxed at the entity level), the landscape in this bill is a bit different. The corporate tax rate was already a flat 21% and that remains unchanged – the bill’s focus was more on extending business provisions and adjusting international and miscellaneous corporate taxes. Here’s how C-corps are affected:

• Stable 21% Tax Rate: No news is good news here. The bill does not raise the corporate tax rate (some had feared a future Congress might). It stays at 21%, and there’s no new alternative minimum tax applied to financial statement income in this bill (the 15% corporate book tax enacted in 2022 is not explicitly repealed here, but further guidance would be needed – for now, corporations should comply with that separate provision until told otherwise). In short, the baseline corporate rate is steady.

• Extended Full Expensing & 179: C-corps get to use the 100% bonus depreciation through 2029 just like other businesses. This is huge for capital-intensive companies – you can fully deduct new equipment, factory machinery, fleet vehicles, etc., upfront which lowers taxable income significantly in the purchase year. The expansion of Section 179 expensing to $2.5M limit will primarily aid smaller C-corps (since many large corporations invest well beyond $4M in depreciable assets and thus phase out). But for a mid-size manufacturing or tech corporation, this could allow immediate write-off of many capital expenditures. These provisions keep the U.S. corporate tax effective rate competitive by accelerating deductions.

• R&D and Interest: The return of immediate R&D expensing is a big win for corporations engaged in research. Many C-corps were hit by the new requirement to amortize R&D over 5 years (starting in 2022). Now they can revert to deducting those costs right away from 2025 onward, boosting after-tax cash flow for R&D-heavy industries (tech, pharma, manufacturing, etc.). Also, the looser interest deduction limit (EBITDA basis) through 2029 means corporations with significant debt financing can deduct more interest expense than under prior law. Highly leveraged companies or those investing in depreciable assets (who had large depreciation that previously reduced their interest limit) will welcome this change as it allows greater interest write-offs for the next several years.

• International Tax Rules: The bill addresses some complex international provisions from the 2017 tax law that were scheduled to tighten. Specifically, it halts the planned reduction of the FDII and GILTI deductions. Under current law, starting in 2026 the deduction for Foreign-Derived Intangible Income (FDII) was going to drop, effectively raising its tax rate from ~13% to ~16%. Instead, the bill keeps the FDII deduction at 37.5% (maintaining the lower ~13.125% effective tax rate on FDII) permanently. Similarly, the GILTI (global intangible low-taxed income) inclusion had a 50% deduction set to drop to 37.5%, but the bill maintains a higher deduction so that GILTI income continues to be taxed at an effective 10.5% rate for U.S. multinationals. This is a relief for corporations with foreign earnings or IP income – their taxes on overseas profits won’t jump up in 2026 as previously scheduled. (On the flip side, the Base Erosion Anti-Abuse Tax (BEAT), which was slated to rise from 10% to 12.5%, appears to remain at a lower rate, keeping that minimum tax on large multinationals more modest, though this bill also adds rules to retaliate against certain foreign taxes, which could affect some companies indirectly.) Overall, multinational C-corps get a friendlier, more stable international tax regime than they would have under prior law starting in 2026.

• Corporate Incentives & Credits: The bill has a few sweeteners for corporations: for example, the employer credit for providing paid family and medical leave is made permanent. If a corporation voluntarily offers paid leave to employees, it can continue claiming a tax credit for a percentage of wages paid during leave, which is now available indefinitely (and even expanded to allow credit for employer-paid family leave insurance premiums). The credit for employer-provided childcare (Section 45F) is enhanced – the maximum credit is increased (up to $500k, or even $600k for small businesses) and the percentage credit is higher. This encourages companies to invest in on-site daycare or partner with childcare providers, offsetting some costs with a tax credit. Additionally, special new credits, such as an “Employer CHOICE Arrangement” credit, encourage small employers to help workers buy individual health coverage by reimbursing premiums (a concept similar to Qualified Small Employer HRAs, now with a credit to sweeten the deal).

• Deductions Curbed for Some: On the flip side, C-corps face that new 1% charitable deduction floor – meaning if a corporation donates, say, 0.5% of its income to charity, it can’t deduct that (only the portion above 1% of income is deductible). This mainly affects corporations that make modest charitable contributions; it’s a small revenue-raiser and incentive perhaps to give a bit more to clear the 1% if they want the write-off. Also, the executive pay limit ($1M cap under Internal Revenue Code 162(m)) is now harder to circumvent: corporations that might have tried to split compensation among related entities to get multiple $1M deductions will find aggregation rules ensure all pay from the corporate group to a covered executive count toward one $1M cap. And if any corporation was benefiting from the plethora of green energy credits (for manufacturing EV components, building renewable energy facilities, etc.), those are largely being rolled back – so planning will need to be adjusted as those incentives sunset.

• Strategic Moves: With these changes, C-corps should strategize how to maximize the new benefits. For instance, 2025–2029 is a prime window to undertake capital investments (new equipment or factories) to utilize full expensing. If your corporation has been capital-constrained, note that interest on new borrowing will be more deductible than it would have been otherwise, improving the after-tax cost of loans. R&D-intensive firms should accelerate domestic research projects to fully deduct costs. Also, if you operate in a highly taxable foreign country or face discriminatory foreign taxes (like digital services taxes abroad), be aware the bill authorizes the Treasury to take countermeasures – possibly extra U.S. taxes or denial of deductions – as a retaliation. While this is an unusual provision, it’s aimed at pressuring foreign governments to back off unfair taxes on U.S. companies. Keep an eye on Treasury guidance if you’re in that boat.

In summation, C-corps enjoy a stable low tax rate and an extension of pro-business tax provisions, with some international relief and domestic investment incentives. They’ll just need to navigate the minor new limits on deductions and the phase-out of some specialized credits. Feel free to reach out to a Beaconshire Advisory specialist for more details about the impact on your C Corp.