One Big Beautiful Bill Act

Fresh Opportunities and Risks to Consider When Modeling

From accelerated expensing to revamped Qualified Small Business Stock rules, the OBBBA has shifted both the numerator (cash flows) and the denominator (risk and discount rates) of the valuation equation. The result is a more dynamic environment—one with fresh opportunities, but also new pitfalls.

With the passage of the One Big Beautiful Bill Act (OBBBA), valuation professionals and business owners alike find themselves working under a new spotlight. The law, signed on July 4, 2025, reshapes the tax landscape in ways that directly alter the assumptions embedded in business valuations. From accelerated expensing to revamped Qualified Small Business Stock (QSBS) rules, the OBBBA has shifted both the numerator (cash flows) and the denominator (risk and discount rates) of the valuation equation. The result is a more dynamic environment—one with fresh opportunities, but also new pitfalls for those who fail to adjust their models and how companies in the different industries are responding to the new business environment.

Some Things Don’t Change

Although the OBBBA introduces new considerations for valuation professionals, many of the core provisions of the 2017 Tax Cuts and Jobs Act (TCJA) remain unchanged. This continuity matters: it allows us to anchor valuation models on familiar tax frameworks while layering in the OBBBA’s adjustments where relevant.

Key provisions that remain the same include:

• Corporate Tax Rate: The flat 21 percent corporate income tax rate, a hallmark of the TCJA, remains in place. This provides stability for C-corporation cash flow modeling.
• Qualified Business Income (QBI) Deduction (§199A): Pass-through owners may still deduct up to 20 percent of qualified business income, subject to the same income thresholds and limitations.
• Individual Tax Brackets: The general rate structure for individual taxpayers continues unchanged, keeping the after-tax income environment familiar for owners of pass-through entities.
• Business Interest Limitations (§163(j)): While mechanics have been refined, the framework that limits deductible business interest* to a percentage of adjusted taxable income remains intact. *Small business exemption remains in effect.
• Estate and Gift Tax Exemptions: The historically high exemption amounts set by the TCJA are preserved, though they are still slated to sunset in 2026 absent further legislative action.

By confirming what has not shifted, we can focus our attention on the true areas of change: cash flow enhancements, QSBS expansion, and the evolving risk dynamics introduced under the OBBBA.

Cash Flow Enhancements and Free Cash Flow Modeling

At the heart of the OBBBA are provisions designed to stimulate business activity by front-loading tax benefits. Companies can now expense certain capital investments immediately, reducing taxable income and freeing up cash in the short term. For capital-intensive industries—manufacturing, energy, and infrastructure—this means larger near-term free cash flows, which translate directly into higher enterprise values under a discounted cash flow (DCF) framework.

R&D incentives have also been strengthened, giving innovative companies the ability to recover costs faster. For life sciences and technology startups, this provision not only supports product development but also enhances valuation multiples by improving early-stage cash flow profiles. In practice, valuation professionals will need to revisit assumptions around EBITDA margins, reinvestment needs, and growth trajectories to properly reflect the impact.

QSBS Changes and Exit Valuations

Perhaps the most headline-grabbing element of the OBBBA is its overhaul of qualified small business stock (QSBS) gain exclusion IRC §1202. The new framework raises the eligibility threshold and introduces tiered tax treatment for gains on qualified stock; 50 percent after three years, 75 percent after four, and 100 percent after five.

For founders and early-stage investors, this radically shifts the economics of exit timing. A sale delayed by even one year can produce significantly higher after-tax proceeds, which in turn, drives up the value entrepreneurs place on their equity today. Buyers, meanwhile, must recognize that sellers may hold out longer to maximize their exemption, potentially reshaping deal pipelines and negotiation dynamics. In short, QSBS provisions tilt valuations upward, but they also alter the timing and flow of transactions in the marketplace.

The nuances of IRC §1202 are complex, and although an appealing part of the OBBBA, are unlikely to affect the day-to-day valuation services performed by most NACVA members. QSBS relevance is often limited to specialized M&A contexts (specifically C-corporations) and/or when advising corporate shareholders on exit strategy.

Discount Rates, Debt, and Perceived Risk

The impact of the OBBBA is projected to add trillions to the national debt, which will in turn, carry implications for the denominator side of the valuation equation: discount rates and costs of capital.

On one hand, enhanced deductions lower effective borrowing costs for many businesses, nudging weighted average cost of capital (WACC) downward and lifting valuations. On the other hand, increased federal deficits may exert upward pressure on interest rates over time; a macroeconomic risk that valuation analysts cannot ignore. The balance between near-term financing relief and long-term fiscal concerns adds a layer of complexity to determining appropriate discount rates. Scenario analysis remains ever essential.

Industry-Specific Implications

The effects of the OBBBA vary by industry (examples thereof below):

• Technology and Startups: QSBS expansion and R&D incentives significantly boost startup valuations, increasing capital inflows and deal activity.
• Manufacturing and Heavy Industry: Bonus depreciation on equipment and infrastructure translates into stronger free cash flow, improving multiples and debt capacity.
• Healthcare and Life Sciences: Immediate R&D/R&E expensing and long-horizon QSBS benefits enhance valuations for early-stage biopharma firms.
• Service-Based Businesses: While benefits are less dramatic, lower effective tax burdens still provide incremental support to free cash flow and valuation stability.

Practical Considerations for Valuation Professionals

For appraisers and analysts, the OBBBA demands both technical and judgmental adjustments:

1. Forecast Models: Pro forma financials should incorporate new expensing rules and adjusted reinvestment assumptions. The OBBBA heightens the need for scenario modeling to capture both short- and long-term effects.
2. Sensitivity Analysis: Because many provisions sunset after 2028, scenario modeling is crucial to capture both temporary and permanent impacts.
3. Discount Rate Adjustments: Analysts must weigh short-term financing benefits against longer-term macro risks.
4. Accounting Alignment: Under ASC 740, companies may need to revise deferred tax asset assumptions, which in turn, influence fair value calculations.

A valuation professional that fails to reflect these shifts, risks producing valuations that are not credible to investors, auditors, or regulators.

Conclusion: Beauty, Risk, and the Bottom Line

The OBBBA casts a spotlight on businesses. For some companies, it will illuminate new pathways to higher value through enhanced cash flow and tax savings; for others, it will expose risks tied to federal government’s fiscal sustainability and legislative sunsets. Ultimately, the OBBBA is not just about numbers on a spreadsheet; it is, as often is the case, about the story we tell around value. To me, this bill compels valuation professionals to sharpen their pencils and widen their lens. Some will cling to old models and miss the shift. Others will see the opportunity and help their clients turn a complex and unevenly applied piece of legislation—as most tax laws tend to be—into a strategic edge. That, in my view, is where the “beautiful” part really shows up.

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Trisch Garthoeffner, ABV, CVA, MAFF, EA, MAcc, has 20+ years of experience in providing business valuation, financial forensic, and merger and acquisition consulting services. In 2020, she was elected to the NACVA Standards Board; in 2021, voted vice-chair; in 2022, voted chair; and is a current Executive Advisory Board advisor for the NACVA Standards Board. She is a past Florida state chapter president for NACVA, a current member of the NACVA exam task force, a board member and quarterly author for the QuickRead valuation periodical, a past treasurer of the Florida Academy of Collaborative Professionals, and a past vice-president of the Southwest Florida Chapter of Collaborative Professionals and current member. In 2024, Ms. Garthoeffner was nominated as a member of Business Valuation Resources (BVR) Leadership Council. On March 06, 2025, she will be in Washington DC with other NACVA representatives[1] to testify regarding NACVA’s collective input regarding the Treasury Department’s proposed rule – Regulations Governing Practice Before the Internal Revenue Service. In her spare time, she enjoys spending time with her daughter, exercising, antiquing, and fostering animals.

Ms. Garthoeffner can be contacted at (239) 919-3092 or by e-mail to trisch@anchorbvfs.com.

[1] T.J. Liles-Tims and Dalton Hopper.