OBBBA tax law reshapes R&D cash flows
Five US companies report mixed impacts from the July 2025 tax overhaul, with R&D expensing rules driving near-term cash benefits.
The One Big Beautiful Bill Act (OBBBA), enacted in July 2025, is already altering cash flows and tax liabilities for a cross-section of US companies by restoring immediate expensing of domestic R&D costs. The law’s provisions—particularly the repeal of Section 174 capitalization requirements—have delivered near-term tax relief, though its broader international tax adjustments are creating new compliance risks and deferred uncertainties.
Pure Storage and Veeva Systems have seen the most direct benefits. Pure Storage reported a lower provision for income taxes in fiscal 2026 after the OBBBA eliminated the need to capitalize domestic R&D expenditures, reducing its US taxable income. Veeva, which had previously amortized those costs, said the law’s two-year acceleration election for unamortized R&D cut its taxable income and eroded its Foreign-Derived Intangible Income (FDII) benefit, though it still expects lower cash tax obligations for the rest of the fiscal year. Both companies flagged future guidance changes as a potential swing factor for deferred tax positions.
Agilent and Signet Jewelers, meanwhile, anticipate no material impact on their effective tax rates or cash flows for fiscal 2026. Agilent highlighted the law’s elective R&D deduction starting in 2026 and 2027 but said the broader adjustments to international tax provisions would not move the needle. Signet echoed that view, though it separately noted that OECD Pillar Two guidance could limit a $263.3 million deferred tax asset to roughly $52.7 million over the next two years.
Toast stands out as the outlier, warning that the OBBBA’s retroactive provisions could increase compliance costs and tax liabilities for itself or its customers, potentially draining operating capital. The company did not quantify the risk but framed it as a headwind distinct from the R&D expensing benefits reported elsewhere. With interpretations of the law still evolving, the full impact on cash taxes and deferred positions may not crystallize until later fiscal periods.
Source: company public filings.