Legacy Law Blog

Since World War II, there have been only two presidents who passed comprehensive tax reform packages: Ronald Reagan and Donald Trump.

During his first term, the Trump administration passed The Tax Cuts and Jobs Act of 2017 (TCJA) which at the time was the largest tax overhaul since the Tax Reform Act of 1986. It impacted individual and corporate rates, base-broadening rules and international taxation.

Trump’s second term has been no different. In just the first year of his second term, Trump passed a second significant tax reform package: the One Big Beautiful Bill Act (OBBBA).

For businesses, 2026 is the year when OBBBA’s permanent changes to rate structures, expensing rules and the Qualified Business Income (QBI) deduction collide with new reporting expectations and evolving state tax laws. Owners of pass‑through entities, C‑corporations and closely held companies in Michigan will need to revisit the assumptions that drove their structures in the “old” TCJA environment.​

Here are my Top 10 Tips for businesses in the new tax environment:

1. Re‑test Your Choice of Entity Under Permanent QBI

The 20% QBI deduction for noncorporate taxpayers is now permanent and comes with relaxed phase‑in thresholds for many service businesses and wage‑based formulas. There is also a new minimum deduction for taxpayers with at least $1,000 of active business income.​

This permanence fundamentally changes the comparison between being taxed as a C‑corporation versus a pass‑through. Businesses should model after‑tax income to owners left over after the QBI deduction, reasonable compensation and distribution assumptions rather than relying on pre‑2026 sunset scenarios.​

2. Take Advantage of Revived & Enhanced Expensing

The OBBBA revives and makes permanent the 100% bonus depreciation deduction for many categories of equipment and restores immediate expensing for domestic Research and Experimentation (R&E) costs with some retroactive relief. Section 179 expensing limits are also significantly higher for smaller businesses beginning in 2026.​

This makes the timing of capital expenditures a powerful tax lever again. Instead of spreading deductions out over several years, many businesses can fully expense equipment, machinery and certain improvements in the year placed in service to smooth cash flow and reduce current‑year tax.​

3. Re‑evaluate Leverage in Light of Updated Interest Limitation

The 2026 definition of adjusted taxable income for business interest limitations becomes more generous with the passage of the OBBBA. Adjusted taxable income once again allows add‑backs for depreciation and amortization in the calculation. For capital intensive businesses with significant debt, this change can make a noticeable difference in deductibility.​

If your company has been aggressively paying down debt or avoiding new borrowing solely to avoid interest‑limitation disallowances, it may be time to revisit the optimal capital structure. The new rules may justify refinancing or restructuring debt on more strategic rather than purely defensive terms.​

4. Modernize Your 1099 & Worker Classification Practices

While the OBBBA and related guidance increase some information reporting thresholds (for example, in the 1099‑K and 1099‑NEC context), they do not relax the underlying obligation to correctly classify workers and report payments. There is also an increasing expectation of e‑filed, data‑driven reporting that will make mismatches easier to detect.​

Businesses should use the “breathing room” from higher thresholds to clean up independent‑contractor policies, platform payment arrangements and backup‑withholding procedures, instead of simply issuing fewer forms.​

5. Leverage Beefed‑up Childcare, Clean Fuel & Community Investment Credits

The OBBBA expands several incentive regimes, including employer childcare credits, clean fuel incentives and enhancements to the Low‑Income Housing Tax Credit and New Markets Tax Credit. Employer childcare credits can now cover up to 40% to 50% of qualifying costs with significantly higher caps, which should be particularly attractive for small and mid‑sized employers.​

These credits turn human resources and Environmental, Social and Governance (ESG) decisions into concrete tax assets. Instead of viewing benefits like on‑site childcare or partnerships with local providers as pure expenses, businesses can incorporate the available credits directly into return on investment analyses.​

6. Prepare for Refresh of Opportunity Zones

The OBBBA makes the Opportunity Zone (OZ) regime a permanent feature of the tax code, but the current designations expire at the end of 2026, with new zones selected starting July 1, 2026 and taking effect in 2027. That means existing projects need to be evaluated against a deadline, while future projects may have access to newly designated areas, including more rural zones.​

Owners with appreciated assets considering OZ reinvestment should pay close attention to timing because the transition between old and new designations will create both risk and opportunity.​

7. For Michigan Employers, Integrate State‑level Wage Changes & Deductions

Michigan’s 2026 landscape includes a higher minimum wage and specific state deductions for qualified tips and overtime that are tied to federal definitions. Employers must be able to identify and report those wage components accurately to support both federal and state filings.​

Payroll systems, timekeeping practices and employee communications all need to be updated so that workers understand why some portions of their income are taxed differently at the state level. For employers in restaurants, hospitality and other tipped sectors, this is partly a tax issue and partly a recruiting tool for hiring and retaining workers.​

8. Price Accordingly in Sectors Impacted by New Michigan Excise & Fuel Taxes

Michigan’s new fuel‑tax regime eliminates the 6% sales tax on gasoline and replaces it with a per‑gallon tax that rises from 31 cents to about 52.4 cents, dedicated to road funding. At the same time, a 24% wholesale excise tax on recreational marijuana sales joins existing cannabis taxes, significantly raising the effective tax burden in an industry already feeling significant pressure from oversupply, regulation and liquidity issues.​​

Fleet‑heavy businesses, logistics operators and cannabis companies need to revisit pricing, margins and perhaps even entity splits between real estate, operations and intellectual property. The combination of higher statutory rates and federal expensing opportunities makes tax modeling essential to avoid under‑ or over‑reacting to these changes.​​

9. Integrate Estate, Succession & QSBS Planning with the New Federal Baseline

The OBBBA is paired with a relatively high federal estate‑tax exemption and specific relief provisions for closely held businesses. It also interacts with the Qualified Small Business Stock (QSBS) rules, which remain a powerful tool for C‑corporation exits in certain industries.​

Owners should align buy‑sell agreements, recapitalizations and equity incentive plans with these rules rather than treating estate and succession planning as an entirely separate discipline. In many cases, small structural tweaks now can dramatically change the after‑tax outcome of a future sale or generational transfer.​

10. Invest in Tax Technology & Documentation Built for 2026 Complexity

Major vendors expect a 10% to 15% increase in the complexity of returns for the 2026 tax season because of the OBBBA’s layered provisions and the need to prove eligibility for new deductions and credits.

Additionally, the need for the IRS to interpret and implement an act as comprehensive as the OBBBA will cause delays at the agency, lead to an increase in notices, and likely result in a higher rate of clarifying regulations and definitions than what would be seen in an average tax year. For businesses, this complexity and uncertainty will show up not just on the income‑tax return but in payroll, information reporting and state filings.​

Rather than layering new spreadsheets on top of old processes, 2026 is a strong inflection point for integrating accounting, payroll and tax systems so that data flows cleanly from source to return. Well‑designed systems and contemporaneous documentation will be as valuable a “tax strategy” as any specific deduction or entity type.​

Businesses should consider 2026 as an opportunity to implement new systems and processes to refresh existing tax reporting technology to incorporate the changes into the current tax regime to make reporting more robust and efficient in future tax years.

BONUS TIP:

When in Doubt, Consult a Tax Professional

Of the tax years in recent memory, this is one where taxpayers should strongly consider discussing their tax situation with a tax practitioner or certified public accountant. This is particularly true if you expect to be impacted by one of the OBBBA provisions described earlier in this post.

When there are new tax provisions or uncertainty as to how the IRS will interpret and implement a new comprehensive act like the OBBBA, careful planning and implementation of a tax strategy will pay dividends for taxpayers when they file their 2026 return next year.