The Tax Strategy

Game-Changing Provisions

“One Big Beautiful Bill” – and hidden within its 389 pages are five game-changing provisions that could dramatically increase your cash flow and investment returns.  Below are two (R&D Tax Credit and Federal Opportunity Zones) of the five game-changers and two state tax developments regarding research and development activities:

Domestic Research & Development (R&D) Expensing: Innovation Without the Tax Burden

What is proposed to change?

The bill creates a temporary Section 174A allowing 100% expensing of domestic research costs for tax years 2025-2029.

Why does it matter?

If your business invests in research and development, this change will restore the immediate tax benefit that was eliminated in 2022. Companies will once again be able to deduct these costs immediately rather than amortizing them over five years.

Our R&D tax credit alliance partners not only help you identify qualifying activities but can now strategically time your R&D investments to maximize both immediate expensing and the valuable R&D tax credit.

State Research & Development Highlights:

New Refundable Research & Development Tax Credit Launches in 2025

If you own or run a business in Michigan and you are investing in innovation. Starting on January 1, 2025, Michigan is launching a refundable research and development tax credit that is designed to reward companies doing research and development work in the state.  Whether you are buying new technology, designing prototypes, or improving products, this credit could transform your business’s cash flow.

Watching:  Texas, Fueling the Future

In a unanimous vote, the Texas Senate Finance Committee has advanced Senate Bill 2206, a crucial piece of legislation aimed at extending and enhancing the state’s Research and Development (R&D) tax credit program, which is currently set to expire on December 31, 2026. It extends the credit and would increase the R&D franchise tax credit from 5% up to 8.722% — and even higher to 10.903% for research conducted through public or private institutions of higher education. The bill expands its use to small and veteran-owned businesses too.  Current Status: Senate Bill 2206 passed the Texas Senate unanimously on April 28, 2025.  As of May 16, 2025, SB 2206 is awaiting consideration in the Texas House.  House Bill 4393 was still in committee as of April 16, 2025.  The Texas legislature is scheduled to adjourn on June 2, 2025.

Federal Opportunity Zones 2.0

What’s in the Bill?

• New Designation Period: The bill would establish a new round of OZ designations beginning January 1, 2027, and running through December 31, 2033.
• Zone Selection Criteria Tightened: Income threshold lowered from 80% to 70% of statewide median family income. Contiguous (non-LIC) tracts are no longer allowed.
• Emphasis on Rural Zones: At least 33% of a state’s OZs must be rural, or a percentage equal to the state’s rural population—whichever is higher.
• Early Sunset of Current OZs: Existing OZs would expire two years earlier, on December 31, 2026 (rather than December 31, 2028).
• New Deferral Date: For investments made under the new designations, capital gains would be deferred until the end of 2033 (rather than 2026).

Enhancements for Rural OZs

The bill includes several favorable provisions targeted specifically at rural zones:

• 30% Basis Step-Up (vs. 10% standard) for rural investments held for five years.
• Substantial Improvement Threshold Halved: The 100% substantial improvement requirement drops to 50% for existing property in rural OZs.
• Explicit encouragement of data centers and other job-creating facilities in rural areas.

Takeaways

While OZ advocates celebrate the inclusion of OZ provisions in the House’s draft, they warn that the bill is “far from final” and still “misses the mark” in several areas. The next several weeks will be critical for stakeholders to advocate for fixes, particularly addressing the 2026 transition, enhancing rural incentives, and ensuring the program remains a viable tool for economic development.

What to do now for your tax strategy?

At Ashmore Consulting, we don’t just interpret policy—we turn it into opportunity. With the likelihood of the return of 100% domestic R&D expensing and the transformative updates to Federal Opportunity Zones, the time to act is now. These provisions can significantly enhance your cash flow, boost ROI, and position your business for long-term growth—if you have the right strategy.

Whether you’re an innovation-driven company or an investor eyeing rural development, our team of trusted advisors is here to help you navigate the complexity with accuracy, objectivity, and independence.

Let’s start a conversation about how these incentives can work for you.

Contact us today to schedule a strategic consultation and ensure you’re not leaving value on the table.

The information contained herein is general in nature and is not intended and should not be construed as legal, accounting, or tax advice or opinion provided by Ashmore Consulting LLC to the reader. The reader is also cautioned that this material may not be applicable to, or suitable for, the reader’s specific circumstances or needs and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact Ashmore Consulting LLC or another tax professional prior to taking any action based upon this information. Ashmore Consulting LLC assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.