There was a lot to talk about as hundreds of tax and financial professionals attended the Faegre Drinker 2025 M&A Conference at the Hilton Des Moines Downtown this week.

Questions about changes in federal rules since the start of the year was the topic du jour at the annual conference. Kyle Hoekstra, a tax partner at RSM, led a session about changes to the mergers and acquisitions space since the legislation known as the One Big Beautiful Bill was passed in July. 

There are several factors to take into consideration regarding changes due to the 525-page bill, including benefits for the manufacturing sector but possible limitations for the agricultural industry. Some of the provisions are temporary, some are permanent, and many have merger and acquisition tax implications. The top takeaway from Hoekstra’s talk is: Do the research. There are pros and cons to many provisions of the bill. Professionals who work in the mergers and acquisitions space should not immediately assume one strategy or model is better than another without taking a close look at the details. 

Highlights of the effect of the bill on mergers and acquisitions include:

• Interest limits: The IRS will base interest limits off of earnings before interest, taxes, depreciation and amortization, or EBITDA, not earnings before interest and taxes, or EBIT. This change could have a major impact on manufacturers and businesses with big capital expenses. “This bill switched us back to the EBITDA test effective 2025, so that’s tax use beginning after December of 2024. Think of your normal ’25 tax year return. We’re not going to have the EBIT test, you’re going to go back to the EBITDA test. That is permanent, which is favorable. It comes back to the ability to actually leverage deals like we are used to doing, the way we’ve modeled them out,” Hoekstra said. “When I look at that, I definitely think when you’re doing your modeling on these transactions and acquisitions, how you do in your cap stack, you’re going to have the ability to adjust your model to account for that lower after-tax cost of debt.”
• Research and development: Domestic research costs can be written off during the year incurred instead of over a number of years. 
• Depreciation and capital expenses: 100% bonus depreciation is back permanently for new construction. “One thing to keep in mind is that magic 1/20/25 date. That is a key date for your cut off for eligibility,” Hoekstra said. “It doesn’t necessarily mean that an asset you placed in service at the end of January would be eligible for that. You have to look if you have a binding contract that would say the acquisition of that entity actually occurred before the 20th.” 
• Qualified business income deduction: The 20% QBI and state tax workaround for partnerships and LLCs remain. 
• Qualified small business stock, or QSBS: Issued after July 5 get new tiers and higher limits. There are several pitfalls, or traps, with QSBS, Hoekstra warned. One of the more common mistakes is with original issuance. “Watch out if you’ve got stock redemptions during the [effective] period,” he said. “Say you’ve got a significant shareholder who disagrees with the direction of the company in year three, year two, whatever it is; they need to be bought out. You say, we’ll just redeem you out with existing cash. That’s fine, you can do that. But keep in mind, you have this concept of, I think it’s 5% or greater, share of redemption that potentially taints stock issuances one year before that redemption date and one year after the redemption date. So, if you have that redemption stock issued in that two-year testing window, it’s not going to meet the original issuance test. So be mindful about that if you have to do redemption transfers.”

Hoekstra suggested that financial professionals and business owners check dates and rules associated with the new bill against how a business operates and has set up contracts. RSM has also published a blog about the topic.