Navigating tax and regulatory shifts: Key updates for public companies

Public companies are facing a rapidly changing tax and regulatory landscape. The recently enacted One Big Beautiful Bill Act (OBBBA) budget reconciliation bill introduces tax changes that affect both individuals and corporations. At the same time, new leadership at the Securities and Exchange Commission (SEC) and the Public Company Accounting Oversight Board (PCAOB) is signaling a shift in regulatory priorities. Together, these developments are reshaping tax planning, financial reporting, and compliance strategies across industries.

Tax updates from the budget reconciliation bill

The OBBBA revises and extends several key provisions of the 2017 Tax Cuts and Jobs Act. Here’s a breakdown of what’s changing:

For individuals and payroll, effective 2025 – 2028

• Tips and overtime wages are exempt from federal income tax.
• Social Security benefits are no longer federally taxed.
• Interest on new U.S.-manufactured automobiles is now deductible.

Corporate tax changes

• Full expensing is back for equipment, machinery, and other qualifying domestic assets with recovery periods under 20 years.
• Domestic R&D costs are again eligible for immediate expensing; foreign R&D continues to be amortized over 15 years.
• Interest expense is now deductible up to 30% of EBITDA, restoring the pre-2022 standard.

Shift toward a cash flow tax base

These provisions shift the business tax system toward a cash flow model. Companies can deduct expenses more quickly, which lowers taxable income in the near term. For debt-financed investments, the combination of full expensing and interest deductions may produce unusually low or even negative effective tax rates on some assets. This change can increase deferred tax liabilities and add volatility to reported earnings.

International tax changes

• The Global Intangible Low-Taxed Income (GILTI)-related haircut on foreign tax credits drops from 20% to 10%.
• The 10% Qualified Business Asset Investment (QBAI) exclusion is repealed, signaling a policy shift toward taxing all foreign income, not just excess profits.
• The proposed revenge tax was removed following G7 negotiations. Instead, the United States will support the OECD’s Pillar two global minimum tax framework.

Regulatory changes: SEC and PCAOB

Shifts in regulatory leadership are also shaping how public companies will be governed and audited.

PCAOB developments

• Recent board turnover is expected to result in a less combative tone with audit firms.
• Inspections and standard-setting activities will continue, but with an emphasis on collaboration over confrontation.

SEC developments

• A broader regulatory strategy is emerging — balancing investor protection with capital formation and innovation.
• A new initiative called Project Crypto is underway to clarify how securities laws apply to digital assets. The goal is to reduce regulatory uncertainty and prevent companies from relocating operations offshore.
• Several controversial rules from the prior administration have been withdrawn. These include the climate disclosure rule, which had been subject to litigation, and 14 additional rules that were viewed as costly or impractical.
• Executive compensation disclosure rules are being reevaluated to ensure cost-effective and investor-relevant reporting.

Together, these regulatory shifts reflect a more business-friendly environment that maintains accountability but places greater emphasis on collaboration while still balancing investor protection.

Implications for public companies and multinationals

The OBBBA also made meaningful adjustments to international taxation, including these financial reporting considerations:

• Immediate expensing will increase deferred tax liabilities, making companies more sensitive to changes in statutory tax rates.
• Companies should revisit valuation allowances and tax forecasts in light of these shifts.

The Financial Accounting Standards Board’s income tax disclosure standard, ASU 2023-09, becomes effective for annual periods beginning after Dec. 15, 2024. This will require expanded disclosures on how tax law changes affect both current and deferred taxes.

International tax planning

• Multinationals need to re-calculate GILTI exposure and reassess their tax rates under the new foreign tax credit rules.
• The repeal of QBAI and a broader international tax base increase the need for robust scenario modeling and forward-looking planning.

IRS and treasury developments

• Leadership turnover at the Internal Revenue Service creates uncertainty around the issuance of administrative guidance.
• The Treasury Department is expected to prioritize clarification on temporary provisions such as the exclusion of tips and overtime pay from taxable income.

What’s next?

The OBBBA is only the beginning. A second reconciliation bill is already being discussed in the House, while technical corrections to the OBBBA are expected. International negotiations, evolving SEC priorities, and the new legal standard for regulatory interpretation will continue to add complexity.

These developments mark a significant pivot in both tax policy and regulatory oversight. Companies must respond by reassessing their tax positions, financial reporting strategies, and compliance frameworks.

The path forward includes:

• Reviewing deferred tax implications and effective tax rate exposure.
• Updating international tax models in light of the QBAI repeal and foreign tax credit changes.
• Preparing for enhanced disclosures under the new FASB guidance.
• Monitoring ongoing regulatory shifts that impact reporting, governance, and innovation.