Signed into law on July 4, 2025, P.L. 119-21, commonly known as the “One Big Beautiful Bill Act,” packs a wide suite of tax policy changes with outsized relevance for insurance companies — notably making permanent many provisions of the 2017 Tax Cuts and Jobs Act (TCJA), which were scheduled to expire on December 31, 2025.
Many of the bill’s provisions provide permanent business tax relief, reshaping tax planning, investment strategy and compliance demands for insurance companies. Below, we outline the 2025 tax reform’s impact on insurance companies and the provisions most heavily affecting the industry, including:
- Bonus Depreciation
- Research & Experimental (R&E) Expenditures
- Rural & Agricultural Interest Exclusion
- Section 179 Expensing
- Charitable Contributions
- Executive Compensation and Employee Benefit Implications
- Qualified Opportunity Zones
- Energy Credit Changes & Transferability Provisions
- NMTC Permanence
Extension of 100% Bonus Depreciation
P.L. 119-21 restores the 100% immediate deduction for qualified property (e.g., certain machinery, equipment and digital infrastructure) placed in service on or after January 20, 2025. This allows organizations to deduct the full cost of such qualified property in the year it is placed in service, rather than depreciating the property cost over a period of years. Additionally, the phase-down is reversed to 40% bonus depreciation in 2025 (and ultimately, to zero after 2026) under the TCJA.
R&E Expenditures Deductibility
Historically, research and experimental (R&E) costs were immediately deductible from taxable income. However, starting in 2022, such investments were required to be capitalized and amortized over five years for domestic research and fifteen years for foreign R&D, following the modifications introduced by the TCJA.
The 2025 tax reform reinstates full and immediate deductibility of domestic R&E expenditures, while maintaining the fifteen-year amortization schedule for foreign R&D. All taxpayers can choose between deducting remaining domestic R&E costs capitalized between 2022 and 2024 in full in 2025, or ratably over 2025 and 2026.
Alternatively, they can continue to amortize such costs according to their current schedule. Additionally, the legislation permits qualifying small business taxpayers to retroactively deduct qualifying expenditures incurred between 2022 and 2024 through amended returns (in addition to the options mentioned above).
Rural and Agricultural Interest Income Exclusion
P.L. 119-21 introduces a new federal income tax exclusion for a portion of interest received on certain loans secured by rural or agricultural real property. The provision supports rural and agricultural development by offering tax benefits to qualified lenders, including some insurance companies operating in rural communities, encouraging investment and economic growth.
Section 70435 allows qualified lenders to exclude 25% of interest income from loans secured by rural or agricultural real estate from their taxable income, effective for loans made after July 4, 2025.
Eligible lenders include:
- Banks
- Savings Associations
- State- or Federally Regulated Insurance Companies
- Federal Agricultural Mortgage Corporation (specifically for loans secured by agricultural real estate)
Qualifying loans must be new, secured by rural or agricultural real estate, including leasehold mortgages, with rural real estate defined broadly to include agricultural production, fishing, seafood processing and aquaculture facilities.
The provision offers tax benefits that can reduce tax liability and enable more competitive loan pricing, while lenders need to adjust their systems to identify qualifying loans and comply with documentation and eligibility requirements.
Section 179 Expensing
P.L. 119-21 has notably increased the Section 179 expense deduction limits, offering significant advantages to businesses making investments in qualifying property. Starting in 2025, the maximum Section 179 deduction increases from $1.25 million to $2.5 million, allowing larger immediate deductions for qualifying investments. The phase-out threshold increases from $3.1 million to $4 million, letting more businesses claim the full deduction; both limits will be inflation-adjusted annually from 2026.
Corporate Charitable Contribution Floor
The tax reform also revises Section 170(b)(2)(A) to allow corporations to deduct charitable contributions only to the extent that such contributions exceed 1% of taxable income, subject to the existing 10% cap.
Excess contributions, as well as those disallowed by the 1% threshold, may be carried forward for up to five years. Notably, if total corporate charitable contributions do not surpass 10% of taxable income, there will be no carryforward of amounts disallowed due to the 1% floor.
This provision will likely decrease corporate charitable giving, especially among small and medium-sized businesses that fall below the 1% threshold and require them to plan their giving more strategically — perhaps by “bunching” multiple years of contributions into a single year to meet the floor.
Executive Compensation and Employee Benefits
The tax reform bill also introduces amendments to Section 162(m), which restricts the compensation deduction for a "publicly held corporation" to $1 million per "covered employee" in the applicable tax year. Effective for tax years commencing after December 31, 2025, P.L. 119-21 broadens the application of this limitation by increasing the entities included in an aggregated group for applying the limitation.
As part of this extension of the entities into an IRC Section 162(m) aggregated group, the Act establishes new rules regarding the allocation of the $1 million deduction limit among members of the aggregated group.
Qualified Opportunity Zones
The qualified opportunity zone (QOZ) regime, which encourages investment in economically distressed areas, was enhanced and made permanent by P.L. 119-21. For insurance companies, this could expand opportunities to invest in Qualified Opportunity Funds (QOFs) in exchange for certain tax benefits or provide financing to projects within designated zones.
Energy Credit Changes & Transferability Provisions
The administration’s tax law maintains the transferability of renewable energy tax credits, a key mechanism for insurance companies to benefit from credits generated by energy projects. However, eligibility for wind and solar credits is being phased out after 2027, shifting focus to alternative technologies like nuclear, energy storage and renewable gas. The preservation of transferability ensures these credits remain a viable tool for tax planning.
New Markets Tax Credit Extension
P.L. 119-21’s permanent extension of the New Markets Tax Credit (NMTC) program, with a $5 billion annual allocation, provides long-term certainty for insurers engaged in community development financing. Insurance companies can make investments in community development entities (CDEs) in return for a 39% federal tax credit.
With NMTC permanence, institutions can now plan multi-year strategies to support low-income communities through loans or equity investments in CDEs. For corporate investors, NMTCs provide a stable investment with an attractive rate of return. For those with banking affiliations, NMTC investments can qualify for Community Reinvestment Act credit.
Let Us Guide You Forward
The 2025 tax reform presents both challenges and opportunities for those operating in the insurance industry, and businesses must stay ahead of the curve to remain successful and compliant. Our industry-focused tax advisors can help you and your organization interpret the new rules and align strategies for long-term success. Connect with your Cherry Bekaert advisor today.
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