New tax rules affect how capital markets firms manage costs and structure
While some provisions offer relief, others introduce friction—especially for firms relying on workplace perks or navigating SSTB restrictions. This article breaks down key provisions and the corresponding implications for capital markets organizations and leaders.
Executive summary: Tax relief for capital markets organizations
The One Big Beautiful Bill Act (OBBBA) changes the tax landscape for capital markets organizations. From the return of full R&D expensing to the permanent extension of bonus depreciation to the tightening of meal expense deductions, the bill introduces opportunities and challenges that could affect how broker-dealers, trading platforms and other businesses manage taxable income, cash flow, and entity structure.
While some provisions offer relief, others introduce friction—especially for firms relying on workplace perks or navigating SSTB restrictions. This article breaks down key provisions and the corresponding implications for capital markets organizations and leaders.
Capital markets organizations face a combination of enhanced tax benefits and business challenges stemming from tax provisions in the OBBBA. Now that there is a federal tax policy roadmap for the foreseeable future, here is a closer look at key OBBBA tax items and their implications for capital markets organizations.
Tax treatment of R&D expenses
The OBBBA makes domestic R&D costs fully deductible on a permanent basis, starting with 2025. Foreign R&D spending is still amortized over 15 years.
Qualified small businesses may be able to apply full expensing retroactively to accelerate deductions for expenses currently being amortized.
What it means for capital markets
Broker-dealers, proprietary trading firms, clearinghouses and exchanges investing in proprietary technologies—such as algorithmic trading platforms, surveillance tools, and risk analytics—benefit from the return to full expensing of domestic R&D. As Brian Blacklaw emphasized, section 174 is top-of-mind for clients, especially those navigating amended returns for 2023 and 2024. Firms should coordinate with tax advisors to determine eligibility for retroactive deductions and model the impact on current and future tax liabilities, deferred tax assets and state conformity.
Bonus depreciation
The OBBBA introduces significant changes to 100% bonus depreciation, making it permanent for most property acquired after Jan. 19, 2025, and establishing a new temporary allowance for qualified production property.
Learn more about the technical changes to bonus depreciation and implications for businesses.
What it means for capital markets
Capital markets firms investing in infrastructure—such as office space, data centers, and security systems—can immediately expense qualifying property, improving liquidity and reducing taxable income. Firms are increasingly exploring cost segregation studies to maximize depreciation benefits, particularly when relocating or renovating office space. Bonus depreciation should be integrated into capital budgeting and lease-versus-buy analyses.
Business interest expense deduction limitation
The OBBBA returns to the original Tax Cuts and Jobs Act (TCJA) calculation for business interest expense limitations. It allows the addback for depreciation, depletion and amortization to the adjusted taxable income calculation, effectively allowing deductions up to 30% of earnings before interest, taxes, depreciation and amortization (EBITDA). This provision is permanent.
What it means for capital markets
Organizations with high leverage may benefit from the broader deduction base, reducing disallowed interest and enhancing tax efficiency. The elective capitalization rules may offer planning opportunities for firms managing volatile earnings or cyclical interest expense. Tax teams should assess how the new rules interact with deferred tax assets and whether capitalization aligns with financial reporting objectives.
SALT cap and PTET
The OBBBA raises the SALT cap to $40,000 beginning in 2025 through tax year 2029, after which it will revert to $10,000. The limitation is phased down for taxpayers with modified adjusted gross income (AGI) over $500,000 for the same period. Both the limitation and the modified AGI threshold are increased by 1% each year through 2029.
Meanwhile, the OBBBA makes no changes to the deductibility of PTET by a pass-through entity, what types of taxpayers can make state PTET elections, or the ability of taxpayers to make state PTET elections.
The final legislation omitted some proposals that would have severely restricted the ability of certain financial services businesses to benefit from PTET regimes. The omitted proposals could have had significant negative impacts on after-tax cash flows for business owners.
Learn more about the technical changes to the SALT cap and the implications for taxpayers.
What it means for capital markets
Investors receiving Schedule K-1s from partnerships or S corporations may benefit from continued PTET deductibility on their federal returns. The SALT cap phaseouts diminish the value of itemized deductions for high-income individuals. Firms should consider whether PTET elections remain optimal in states with high marginal rates and whether alternative structures—such as tiered partnerships—could enhance deductibility.
Employer-provided meals
The OBBBA modifies section 274(o) to disallow 100% of the deduction for certain employer-provided meals beginning in 2026. This includes meals served at employer-operated eating facilities and those provided to employees “for the convenience of the employer”. Although the OBBBA introduces exceptions for businesses that sell food and beverages to customers and for certain fishing industry operations, those carveouts are narrowly drawn and unlikely to apply to capital markets firms.
What it means for capital markets
The deduction disallowance will affect capital markets firms that provide meals to employees as a workplace convenience—for example, trading firms that offer meals to keep traders on the desk during market hours. This may not involve large dollar amounts, but it could create a recurring nuisance cost for firms accustomed to deducting those expenses.
Tax teams should prepare for the change by quantifying the impact on after-tax cash flows and considering whether to adjust internal policies around meal provision or employee reimbursements. Tax teams should also review employee income reporting and fringe benefit classifications to ensure compliance.
Exclusion of gain on the sale of qualified small business stock
The OBBBA expands the gain exclusion rules for the sale of qualified small business stock (QSBS), mainly through the following three changes applicable to QSBS issued after July 4, 2025:
- Provides a tiered exclusion: Allows taxpayers a 50% exclusion for shares held at least three years, a 75% exclusion for shares held at least four years, and a 100% exclusion for shares held at least five years.
- Increases per-issuer limitation: Raises the per-issuer gain exclusion cap from $10 million to $15 million (indexed for inflation) while still leaving available the 10-times-basis limit if greater.
- Increases corporate-level gross asset threshold for qualification: Increases the gross asset threshold from $50 million to $75 million (also indexed form inflation).
What it means for capital markets
Investment banks advising on secondary transactions or IPOs for QSBS-eligible companies may see increased demand for structuring expertise. The expanded exclusion tiers and asset thresholds enhance investor appeal. Firms should update due diligence protocols and ensure offering structures preserve QSBS status—especially in multi-round financings.
Qualified business income deduction
The OBBBA makes permanent the QBI deduction at the current 20% rate. Certain pass-through entities are eligible. This was a temporary provision in the TCJA that was set to expire after 2025.
Learn more about the technical changes to the QBI deduction and the implications for businesses.