What the One Big Beautiful Bill Act Could Mean for Construction Companies

By Kaitlyn Coburn, Manager and Krysta Smith, Manager - Kernutt Stokes LLP

As the Senate’s version of the One Big Beautiful Bill Act continues to make its way through Congress, construction companies across the country are watching closely and for good reason. The bill carries with it provisions that could significantly reshape the tax landscape for the construction industry, offering both opportunities and challenges depending on how companies are positioned.

Bonus Depreciation

One of the most headline-grabbing elements, especially pertinent to construction companies that routinely invest in heavy equipment and other capital-intensive assets, is the Senate’s endorsement of the return of 100% bonus depreciation for eligible assets placed in service through 2029. Under current law, those same assets would only qualify for a 40% bonus deduction in 2025, 20% in 2026, with bonus depreciation fully phasing out in 2027. The proposed change to bonus depreciation would allow companies to fully expense qualifying purchases immediately, potentially freeing up substantial cash flow and encouraging reinvestment in operations or workforce expansion. The bill would also make permanent the rules under the percentage-of-completion method of accounting for allocating bonus depreciation to a long-term contract, providing consistency for companies managing multi-year projects.

Qualified Business Income (QBI)

Another key provision is the Qualified Business Income (QBI) deduction (199A pass-through deduction). The House version proposed increasing the deduction from 20% to 23% and making it permanent. However, the Senate version does not increase the deduction and instead would make the 20% deduction permanent. This provides long-term certainty for future tax planning and continues the effort to reduce the disparity between corporate and individual tax rates.

Accelerated Depreciation

The bill also includes a provision for accelerated depreciation of newly constructed factories placed in service before January 1, 2031. For construction companies, this could create an opportunity for construction firms to capture a wave of new project demand. By allowing businesses to write off the cost of factory construction more quickly, the bill reduces the after-tax cost of capital investment, making large-scale development projects more financially attractive. Construction firms that specialize in industrial and commercial builds could stand to benefit directly from this policy shift.

Opportunity Zones

Opportunity Zones (OZ) are renewed in both versions of the bill, which allow for deferral and potential elimination of capital gains taxes related to specific designated investments which support development in low-income communities. The house version of the bill would end the current designations and authorize a new round of designations for 2027-2033 with a 33% rural zone requirement. It would also apply stricter eligibility requirements and enhance reporting requirements. The Senate version would establish a permanent OZ policy, creating a rolling 10 OZ designation starting in 2027, as well as strengthening eligibility requirements.

Research and Development (R&D)

The bill also addresses the treatment of domestic research and development (R&D) amounts, an area that, while traditionally associated with tech and manufacturing, has historically been relevant to construction firms. Under current law, these expenses must be capitalized and amortized over five years, which can delay the financial benefits of innovation and create cash flow issues. The proposed legislation would allow immediate expensing of qualified domestic R&D paid or incurred in tax years beginning after December 31, 2024. For construction companies investing in new building technologies, sustainable materials, modular construction methods, or digital project management tools, this change could significantly improve cash flow and reduce the cost of innovation. Additionally, the provision includes rules to coordinate the immediate deductibility of domestic R&D expenses with the research credit, ensuring that firms can fully leverage both incentives. This alignment encourages continued investment in process improvements and technological advancement, key factors in staying competitive in a rapidly evolving industry.

Pell Grants Expansion

The Senate version of the bill proposes to expand the eligibility for Pell Grants starting July 1, 2026, to students enrolled in short-term, high-quality, workforce-aligned programs. This expansion is particularly important for the construction industry, where the demand for skilled labor continues to outpace supply. By making financial aid available for vocational and technical training programs, the bill lowers the barrier to entry for individuals pursuing careers in the trades. For construction companies, this could mean a broader, more accessible talent pipeline and the potential to fill critical roles more quickly. It also supports long-term workforce development by encouraging more individuals to pursue specialized training in areas like electrical work, plumbing, HVAC, and heavy equipment operation skills that are foundational to the industry’s success.

Conclusion

While the bill could present opportunities for the construction sector, it also introduces complexity. Companies will need to evaluate how these changes interact with their existing tax strategies, entity structures, and long-term business goals.

As always, proactive planning will be key. Construction firms could begin modeling the potential effects of the bill now, even as its final form remains in flux. Engaging with tax advisors early can help ensure that companies are ready to act quickly once the legislation is finalized. If you’d like to discuss how One Big Beautiful Bill might affect your business specifically, contact our construction industry team to help you navigate the changes and identify the best path forward.

Reprinted with permission of Kernutt Stokes LLP