Federal tax reform is reshaping the landscape for startups and investors—and Michigan’s venture community is right in the middle of it. The recently enacted One Big Beautiful Bill Act (OBBB) introduces sweeping changes that directly affect venture-backed companies, founders, and investors.
Key Tax Changes to Consider
- The OBBB rewrote the rules for Section 174 R&E deductions
The One Big Beautiful Bill Act (OBBB) repeals the TCJA’s requirement to capitalize and amortize Section 174 research and experimental (R&E) expenses. Businesses can now immediately deduct these costs in the year they’re incurred, restoring a valuable tax benefit for innovation-focused companies and improving cash flow — especially for startups and tech-driven firms.
- Qualified Small Business Stock (QSBS)
The OBBB introduces several taxpayer-friendly updates to Qualified Small Business Stock (QSBS) rules for stock issued after July 4, 2025. Key changes include increasing the minimum gain exclusion from $10 million to $15 million (adjusted for inflation), replacing the five-year cliff vesting with a phased gain exclusion starting at three years, and raising the aggregate gross assets threshold from $50 million to $75 million. These updates enhance the appeal of QSBS as a tax planning tool for founders and investors.
- Energy Tax Credits
The OBBB significantly reshapes the landscape for clean energy incentives by phasing out or tightening eligibility for many popular tax credits, including Sections 25D, 30C, and 45Y. It also proposes eliminating credit transferability and adding new restrictions tied to foreign ownership. These changes could reduce the financial appeal of clean energy projects, potentially slowing demand and impacting sales pipelines.
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MVCA members are invited to join Wipfli for their Policy Pulse: Mid-Year Policy Update Webinar on August 13 to stay informed and prepared.