Overview of the New Tax Laws in the OBBBA – The Accounting Technology Lab Podcast – July 2025

In this special podcast, Brian Tankersley, CPA, and Randy Johnston welcome Wolters Kluwer tax law expert Mark Luscombe, CPA, to discuss the key changes to tax law with the passage of the One Big Beautiful Bill Act. Read the related article. Or watch the video, listen to the audio, or read the transcript below.

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Transcript (Note: There may be typos due to automated transcription errors.)

SPEAKERS

Brian F. Tankersley, CPA.CITP, CGMA, Mark Luscombe, Speaker 1, Randy Johnston

Brian F. Tankersley, CPA.CITP, CGMA  00:00

Randy, welcome to the accounting Technology Lab, sponsored by CPA practice advisor, with your hosts, Randy Johnston and Brian Tankersley,

Randy Johnston  00:10

welcome to the accounting Technology Lab. I’m host, Randy Johnston with my co host, Brian Tankersley and we are super privileged today to have a guest from Wolters Kluwer, Mark liscum. And I’ve known of mark for years, but I don’t believe that I’ve ever met him, until today, and we had asked for expertise from Wolters Kluwer explaining the one big, beautiful Bill Act, the tax changes, which are so significant, and we were recording this one week after the bill was signed into law, and understand that there will be some more interpretations, as we see it by the IRS, there’s obviously no legal challenges and all that type of thing in place. And the bill is so large, it is hard to find many of the provisions within the law. So when we had the opportunity to speak with somebody who knows it cold, we took the opportunity. So Mark, welcome. What would you like our listeners to know about you and your background?

Mark Luscombe  01:17

Well, thank you. Glad to be here. Brandi, Brian, I’ve a lawyer and a CPA, and I’ve been in with Wolters Kluwer exactly 30 years, almost almost to the day. And before that, I was in the private practice of law for about 20 years in Chicago. And so I’m, my role at Walters glory is to sort of monitor tax law and and help help Walter’s floor get out guidance to the to their clients about what’s changes. And so this is, this is my bread and butter right here. Well,

Randy Johnston  01:57

you know that’s so fun to listen to you say, because it sounds like you get to do what you like to do pretty much every day. That’s Brian and I on technology. We just get to watch technology and teach people about it and try to interpret it well with if that is the case, what would you say are the most significant things that people need to know about the act?

Speaker 1  02:20

Well, I would say there’s a I mean, you’re right, it’s a huge act, so there’s a lot to say, but I see a few sort of themes running through here. Of course, the main purpose of the Act to begin with, was the extension of the expiring individual provisions from the tax cuts and Jobs Act. And that’s that’s sort of interesting, because although it’s the most significant thing, it’s the thing that people might not notice, because what it primarily did is just keep in place a lot of provisions that that we’ve been familiar with since 2018 so a lot of people will just be happy that there is no change and life goes on as they’re accustomed to. But a few other things sort of have snuck in here. There’s a lot, lot of new requirements for social security numbers on various provisions of the law. Some, some addressing provisions that that are being extended. Others just sort of like the American Opportunity Tax Credit and a Lifetime Learning Credit only, only come in here to add a Social Security Number requirement. And then another theme, I think generally, is sort of Trump’s focus on, you know, America first, some of these provisions no longer available to foreign entities or or are less less favorable to foreign entities. And you’ll see that theme running through here also, and then and then, I think a lot of the a lot of the media focus has been sort of on the on the non tax provisions, the things like Medicaid and snap and some of those things. And we probably won’t get into those, but that’s, you know, that’s been a big concern for a lot of the media coverage in terms of the impact of this. But we’re here to focus, I think, on the tax provisions.

Randy Johnston  04:20

And, you know, it was interesting. Your comment there about, you know, the America first positioning, because, you know, we talked a little bit before we went to recording about international provisions, and I suggested to mark that focusing on things that affected you as practitioners in the US, mainly with US based practices was probably wise, but there was a whole can of worms. He said, I can open that international can of worms if you’d like to do it. So are there some domestic or, sorry, are there some international things mark that you consider worth calling out before we turn our attention to. Domestic

Speaker 1  05:03

Well, we, from the tax cuts and Jobs Act, we, we got familiar with things like city and beat and gilti. And I just think it’s interesting that they, they decided to, I think it was the Senate that decided to change the name of gilti. So let me, let me check here, but we’ve not now got a new term, net CFC, tested income is the new term for gilti. So if you start seeing that term, it’s, I don’t know if there’s an acronym for this yet, but, but I guess we didn’t want to be guilty

Randy Johnston  05:36

anymore. I guess not. In fact, I had just gotten used to using guilty. I do sit in tax courses and do discuss the topic enough, but yeah, in fact, even when we think about the many pieces that were identity items, I didn’t realize there were so many social security additions in the bill.

Speaker 1  06:00

Yeah, yeah, that’s and in terms of who’s going to benefit from this, I think that that could be a big factor in some of these there. Could, you know, you used to be able to use a taxpayer identification number, that was sufficient, and that sort of thing. So, so that could be a factor in who, who benefits. And, for example, with the Trump accounts, that’s also a requirement there, and that applies at birth. So people, people will want to be wanting to get their their newborns as a security number just as soon as possible. I think that’s that’s been the case before. But just to re emphasize that, yeah,

Randy Johnston  06:38

you know, as I reflect on that particular issue Mark, I did get socials for all my children almost immediately when they were born. But there was not the provision of, you know, some dollars, you know, involved in it, in it at that point. But it’s also been interesting to just watch the tax implication on my children as they’ve aged and matured. So any other international pieces before we turn to domestic

Speaker 1  07:07

Well, let me, let me take a look here. Well, I think, I think there’s, you know, the city and net CFC tested income. There’s just been minor changes. I would say in a lot of the percentages under the tax cuts and Jobs Act, a lot of them were going to start changing at this point anyway, but they sort of changed the percentages. And I don’t think it’s a lot of the international people are familiar with them. I think one thing that got a lot of attention was the revenge tax that was being talked about. And it was going to be basically a tax on people that, or countries that, in some view of the administration, were taxing the US unfairly. And so it was going to be attacks on them. And sort of interestingly, after Trump came back from the g7 Summit, he he asked that that piece be removed from the legislation, and it was removed so so it looks like maybe he got inspired at the g7 to maybe work a little more closely, perhaps with with the OECD on some of these international tax provisions and and not sort of go our own way with the revenge tax

Randy Johnston  08:29

I had missed that particular removal. Well, that I did note was just the calculation on depreciation and interest, which, you know, in my size businesses actually makes a difference, you know, but what other types of things would you say that would impact many of the US businesses and many of the clients of our CPA firms?

Speaker 1  08:54

Well, we had, we had, sort of three provisions, primarily from the tax cuts and Jobs Act that had already started to phase down. So that’s bonus depreciation and research and experimental deductions and and the limitation on business interest and and there’d been efforts ever since they started phasing down to try to restore them to their tax cuts and Jobs Act level and and those had basically failed until this point, but apparently, since enough time has passed that they maybe thought it was no longer wise to go back and retroactively adjust all those provisions. So by and large, these changes in the in this, I keep wanting to call it, build back better, but too many bees in the big, beautiful bill are not, are not, are not, generally retroactive. They. They apply one by starting January 19, 2025, one starts going back to December 3120 24 so there, so, for example, on bonus depreciation, there will be a couple couple of years where, where you it was more limited, and now, now you can, you can you can go back and get 100% bonus depreciation again, but it wasn’t a smooth path all the way through.

Randy Johnston  10:26

Okay, I appreciate that, because that’s one provision that I think I had read that I thought would affect me in 22 three and four, if I read the provisions correctly. But it might only be 23 and four. Well, for the, you know, for the

Speaker 1  10:42

for the research and experimental deductions, there is a special provision for for what they call small business, where they can elect, it’s not a requirement, but they can elect to go back an additional two years and and retroactively claim the 100% which which larger these are not entitled to do so a little, a little break for smaller businesses there and then. On the the the business interest limitation, that’s basically what it changed. There was basically a change in how it was based what it was based on the depreciation and and that, that sort of thing, they had changed the formula, and now they’re going back to the original formula for determining the limitation, which makes it a little more a little more less onerous the limitations

Randy Johnston  11:35

understood. And I know my friends in the aircraft industry, I’m from Kansas, in Wichita, were super excited about some of the provisions for private aircraft, which were, you know, big wins for their jet and Tesla and people like that. So, but I don’t know that affects many of our listeners directly, but it sure made a big noise in Wichita. So, you know another one that I was looking at the traffic before we started speaking today, there was a lot of 1099, traffic out there as well, trying to interpret what was going on there. So any particular sites in that area?

Speaker 1  12:20

Yes, I’m not, I’m not sure how far, how much the IRS will like the changes, because the IRS, you know, historically, has always been pushing for more third party reporting because that improves compliance. There’s, there’s very little under reporting of w2 income because of the w2 so, so with respect to 1090 nines in general, there had, for years, had been sort of a standard $600 threshold for 1099 reporting going back a long time and and that has been in this bill increased to $2,000 so a Big change there. And, you know, the IRS may be concerned that, you know, at the $600 up to the $600 level, there may have been under reporting, and now maybe there’ll be some under reporting up to the $2,000 level, but, but at least it’s, you know, one of the concerns, of course, with 1099 reporting by businesses is just the volume that’s required of to get out all those reports, and that will be a benefit to businesses to have to do less of that. And then they the 10, 99k, for four years that was, you know, $200,000 or 200 transactions. And then that was sort of radically changed, down to $600 but that that, although the law called for that to come immediately into effect the IRS, I think anticipating the being itself overwhelmed by the numbers of 1099, KS, sort of did a phase in approach, and we went to 10,005 1000. And we never, we never got to 600 and now this legislation restores it back to the 200 transaction, $200,000 so, so again, a lot of relief for the 10, 99k there, and one other, one other area that’s not in this legislation, but it was also changed was the 1099 da for digital assets that the IRS was going to require that defi broker, sort of brokers who don’t Take ownership of the digital assets, but just facilitate transactions, the IRS is going to require them to report on 1099 da, and there was concern they didn’t have that information to do those reports and and separate legislation basically eliminated that defi reporting. So So several changes in 1099 Yeah, and

Randy Johnston  15:00

that makes sense. Well, I know Brian, and Brian and I in prior County Technology podcasts have talked about that $600 limitation, because you said it was a long time in the past. I think it was sometimes, like 1955 or something, that that amount was said. And also, you know, we’ve talked about cryptocurrency frequently, including the week the executive order was signed on crypto, we had an episode on that. So if you have not listened to that episode, we still believe that’s wrecked. And with the week of July 14 being crypto week in DC, it’ll be interesting to see what changes occur in crypto positioning in the next week or so. So thank you for calling out that 1099 da, so that’s a pretty significant change on the 1099 are there other key provisions? Because, as you know, there’s just been a frenzy around people talking about tax planning, and of course, we’ve got this whole shift from tax compliance to tax advisory that people are trying to leverage. But do you see other major impacts in the tax planning area where there’s longer term effects that maybe need to be considered mark,

Brian F. Tankersley, CPA.CITP, CGMA  16:22

let me, let me inject here. I think there was a provision related to exclusion of gain of small businesses that that seemed like it could be an entry, it could potentially be a planning opportunity, but again, I’m just reading what I read in The Wall Street Journal.

Speaker 1  16:42

Well, the, I think there are a lot of provisions where there were little, little cutbacks and things. I think, I think one, one area that was for for pass through entities, that was sort of being debated in the bill was with respect to the state and local tax deduction, and the states had been basically IRS gave the blessing to do a workaround if you had a pass through entity. And so a lot of states acted facilitating legislation to permit a assault workaround and get a get a full deduction through a pass through entity. Now this, this legislation, mostly due to pressure from Republican representatives from high tax states, got in a an increase in the salt limit from $10,000 to $40,000 but it’s only, it’s only effective until 2030 and then it reverts back to $10,000 but the House Republicans finally went along with that. But there was talk about an exchange for that increase to $40,000 to eliminate that pass through entity work around. But I think the AICPA and other people viewed against that. And finally, they did preserve that pass through entity work around for the salt limitation

Randy Johnston  18:12

makes sense. And you know, another one that I saw traffic on, not my deal, but the gaming restriction, I thought was an interesting one to put in as well. 90% I think it was right,

Speaker 1  18:24

right. I think the, I think I just saw a column on that in the Wall Street Journal that a lot of senators are saying they had no idea that that provision was, was in the in there, and someone, someone already in the Senate, posed a unanimous consent yesterday, I believe, to to get it removed. And, and when only one senators needed to object to something like that, and, and someone objected. So it’s still there.

Randy Johnston  18:55

Well, there are so many things about the legislative process that I still don’t know, even though I think I’ve tried to follow things through the years, but some of the maneuvering here is simply fascinating to me now, are there, in your opinion, Mark other key provisions that our listeners should be aware of? And just a social comment here, we recognize there’s a lot of details in the bill to be worked out, like we said earlier in the recording. But the fact matter is, this session is not to teach you the details of how to apply these but just to give you the big umbrella of what to watch for and things that you should specifically be looking for for your clients. And there will be many pundits, I guess I’ll say that will you know, read and interpret and call out different provisions and dozens and dozens of changes are in place here. So this is going to take some, some careful study, I would say, for most practitioners in. This coming year, and it is going to affect some of the retroactive things as well. So there will be a bit more heavy lifting, as I’d see it, this year and next year, to try to accommodate all this,

Speaker 1  20:15

right? And as you alluded to earlier, the you know, as usual, Congress has sort of just put a surface boss on some of these and left the details to Treasury and the IRS to flesh out. And and so we don’t, we don’t really have all the answers yet. And and the IRS, as is often the case, will be under a lot of pressure to get out its guidance before next year’s tax season to help us deal with all these provisions.

Randy Johnston  20:44

And for our listeners, just a reminder that the people like Walters Kluwer who create access tax or Pro System tax and other platforms, have to have their coders working on this, and they usually try to have the rough code running in November, December. So you know, if it’s not interpreted by, let’s say, the end of October, the poor programmers are scrambling, and a lot of times that testing that has to happen when you get that code released January, 20 or so. You know, there, I expect a lot more adjustments in this coming tax season, as changes to the laws are better understood, or coding errors are repaired, those things just happen. So just be cautious as you’re thinking about your coming tax season, because I feel sorry for the poor tax coders on these programs, because there’s going to be a lot of change? So other key provision Go ahead, Brian

Brian F. Tankersley, CPA.CITP, CGMA  21:47

Mark, are there any particular issues that you know, besides the salt limitation, any particular issues that have that are particularly that are that are more difficult or more problematic, where the state legislatures are going to have to take action to make these things line up. I know, over the years we’ve had, we’ve had big tax laws. There have been issues at the state level, where, where they have to, you know, the legislature has to take some action so that the deductions line up between the two that state and federal.

Speaker 1  22:21

Yes, the well, some California comes to mind as some states just don’t automatically accept any internal revenue code changes. They have to take legislative action to adopt them. Some other states sort of automatically adopt these changes, and then if they want to make exceptions, like sometimes they do on the depreciation provisions or something like that, then they do that. But a state like California, none of this applies to California until California legislature takes some action. And sometimes they’re a little slow in doing that. Yeah, and,

Randy Johnston  23:00

you know, I think about states like Texas, they only meet every other year. But specifically, again, I’m from Kansas, and I’ve seen at least six provisions that don’t lie align with Kansas law. And so there’s going to be issues there and and there’s some pretty significant dollar shifts that are coming from the bill forced into Kansas. So I know they’re forced into all the states. Probably the only, you know, since you were talking about the high profile headlines of, you know, Medicaid and snap, you know, the only state that got relief there was Alaska, with Murkowski. So maneuver right at the end. And that was so specific to what whalers and fishermen or something like that. It was very, very narrow, right?

Speaker 1  23:47

That’s, uh, sometimes, as you study these tax laws, you get, you start to see patterns. I, I once did a column on bows and arrows, because it seemed like every tax law changed the excise tax on on bow and bows or arrows in some respects, and sometimes it was shafts, sometimes it was other things, but every bill had something and and another theme that I see running through here is almost always there’s some special provision involving Alaska so but that that even predates Sullivan And and Markowski, that goes back to their predecessors too.

Randy Johnston  24:23

Yeah. You know, it’s hard to picture, because many of our listeners are young enough at this point they don’t remember when Hawaii and Alaska became states. So you know when they were still territories. But I I remember that, and I suspect you might too, Mark but well, you know, I’m gonna just maybe ask Brian if there’s other things, because Mark clearly has command of the content. So Brian, are there other things that you would like to ask

Brian F. Tankersley, CPA.CITP, CGMA  24:52

of Mark? Mark, can you give us a quick, high level on the overtime and epic? Exclusions. Did they make it to the final bill? And what, you know, what are they in, and what’s in, and what’s out with respect to that? And you know, what’s, what are, how’s that going to affect us on payroll taxes?

Speaker 1  25:13

Sure. Well, there’s, there’s a lot of mislabeling on that, because, you know, Trump, Trump originally posts no tax on tips, no tax on overtime, and, and we didn’t, everyone’s still sort of talking about that, but we really don’t have that. What we have is a a deduction for tips and a deduction for overtime. So they are, they are still subject to the FICA taxes and, and there are, there are phase out. So there will be people who are who are still subject to taxes on tips and overtimes. And there’s dollar limits or overtime. It’s what seems to me, a a fairly low $12,000 $500 $12,500 cap. And for for tips, a $25,000 cap. So maybe the tip seems a little more a little more realistic to I don’t there’s probably some people out there who make a lot more in tips than 25,000 but, but I think for a lot of people, that would be pretty helpful. But for overtime, you know, I hear in a lot of industries that over time, can be a pretty significant part of compensation. And 12,500 there seems seem perhaps a little low.

Randy Johnston  26:28

Yeah, yeah, that makes sense. And I’d actually run the numbers on Kansas and some tip and overtime employees will actually have tax increases with the Kansas law the way the provisions were written. So that’s when we’re talking about aligning. It’s like, oh, this is an increase on tipped employees. So it’s pretty stunning when I ran the numbers on Kansas law,

Speaker 1  26:50

and that’s the legislation tries to, tries to limit the ability to sort of play with the system, the in terms of tips, the Secretary of Treasury is direct, been directed within 90 days, days to come out with a list of occupations that qualify for for tips. You know, basically it’s focused on the food and beverage industry, and they’ve added in their care and the beauty industry. But will be interesting to see what that list of occupations that the Secretary comes comes out with to to see what they feel are occupations that qualify for for tip this tip deduction, I

Brian F. Tankersley, CPA.CITP, CGMA  27:34

think you’re going to see a lot of I think you’re going to see a lot of folks try to reclassify administrative staff as baristas so they can take tips. You know, it’s going to be, it’s going to be very interesting to see the machinations that everybody goes through once those regs come out.

Randy Johnston  27:51

Yeah, indeed. So, one other one that I had a question on Mark was on the qualified Small Business stock provision. You know, I know there’s some terms, like five years and 10 million, those types of things that were in there. But can you give any guidance in that area? Again, not trying to get too detailed on you, and so that might be a bit of a curve.

Speaker 1  28:14

Yeah. So the Oh, you still, you still have the the 100% vision for for the five year which, which we’re sort of familiar with, but I’m not, I’m not sure exactly what the motive was. Maybe some people felt they were pressured to exit, exit the investment sooner than that. So they added in, let’s say I don’t have it in front of me, but I believe it’s 50% for three years and 25% for four years, and still the 100% for for five years. So a little a little more flexibility there, and exiting a 1202 positions,

Randy Johnston  28:54

yeah, and that, I think those are the numbers that I read as well. So again, when our listeners here are just thinking about all these provisions, hopefully they can look for their you know, Wolters, Kluwer answer connect guidance to say, Okay, this is accurate. And I know you had some history with the publication division, don’t now, but did have some history, and we were smiling about Charlie turbush Before we started today. Then Brian will smile because he knows him as well. But how long does it usually take these type of provisions to hit the guidance, and how long does it take interpretation to hit the guidance?

Speaker 1  29:40

Well, usually it’s, we have a lot of these provisions that are effective immediately and, and some, some that are, you know, sort of retroactively effect, because here we’re about in the middle of 2025 and, and they’re effective for 2025 so, so, for example, on we. Were just talking about tips and overtime. So the legislation sort of says to employers, well, it’s effective for 2025 and you didn’t know about it for the last the last six months. So you can go back and use any reasonable method that says that’s approved by the Secretary. So so you’ve got any reasonable method, but you have to have it approved. So we’ll see if the SEC Treasury comes out with a list of approved methods very quickly, but, but people will be needing to go back and sort of help document the last six months, as well as the coming months and and we’ll have to wait for the Treasury to tell them what those reasonable methods are.

Randy Johnston  30:44

Yeah. Well, the machinations, word that Brian just used kind of comes to mind again, because it’ll be a creative bit of accounting there. Well, Mark, are there any final parting thoughts that you’d want to make sure that our listeners didn’t miss based on your understanding of the act.

Speaker 1  31:03

Well, we another, of course, there’s changes all over the place. Another thing I wanted to mention was qualified opportunity zones that that was made permanent. And they also, I mean, there is some concern about the original qualified opportunity zone provision that it really helped too many areas that were already ripe for development, say, a, you know, a downtown area that was down on its luck, but right adjacent to sort of a prosperous area was included, and those were probably ripe for development anyway, and and a lot of the qualified zone money went to some of those types of areas. So there’s some provisions in here, and I’m not sure just how it will turn out, but focused on rural, rural Opportunity Fund, sort of a separate branch off of that, and a redefinition of low income communities. So there may be, there may be more opportunities under the qualified opportunity zones to help out some of the areas that are depressed, that aren’t, aren’t next to, right next to already prospering areas. Yeah.

Randy Johnston  32:14

Okay, well, super well, I can’t tell you how much we appreciate your time today. Mark, again, the bill is so big, I don’t know how long a session like this could actually go if we were going to be orderly and step through provision by provision. That certainly wasn’t the goal. But we do appreciate your offer to join us today, and we appreciate all of you listening in and we’ll talk to you again soon in another accounting Technology Lab. Good day.

Brian F. Tankersley, CPA.CITP, CGMA  32:42 Thank you for sharing your time with us. We’ll be back next Saturday with a new episode of the technology lab from CPA practice advisor.

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