Description

On July 4, 2025, OBBBA was signed into law by President Trump. OBBBA permanently extends many provisions of the Tax Cuts and Jobs Act of 2017 (TCJA) that were set to expire at the end of 2025 and made several key tax reforms that will have potentially significant consequences for private equity funds and their sponsors. These changes are generally viewed as favorable for the private equity industry.

Under OBBBA, the private equity industry will potentially have greater tax planning stability, improved tax incentives in respect of capital expenditures, and expanded tax benefits for domestic investments. Some key OBBBA provisions relevant for private equity include expansion of the qualified small business stock (QSBS) exclusion, relaxed limitations on deductibility of business interest, permanent extension of the qualified business income deduction, and expansion of bonus depreciation.

There were also a few key proposals that did not make it into the final Act, leaving what is generally viewed as a more favorable tax regime in place for private equity funds, sponsors, and investors. The notable omissions include no changes to existing "carried interest" rules, no changes to the preferential capital gains tax rate, and no new "retaliatory tax" on certain foreign investors with respect to inbound U.S. investments and financings.

Listen as our authoritative panel discusses the important implications of OBBBA and business and investment strategies private equity funds, investors, and portfolio companies may want to consider to take advantage of these tax benefits.