More context: 3 hidden OBBBA wins (and what to do with them)
1. EBITDA is back and so is leverage strategy
The return of EBITDA-based deductibility under Section 163(j) improves tax efficiency for sponsors and portfolio companies. That’s a clear win for leveraged buyouts and structured growth capital plays. However, for larger portfolio companies with average adjusted financial statement income (AFSI) exceeding $1B over three years, the Corporate Alternative Minimum Tax (CAMT) may offset some of this benefit.
The play: Refresh deal models and tax provisions to reflect both standard tax and CAMT scenarios. Proactively evaluate the net impact on free cash flow and exit readiness.
2. QSBS is more powerful, but also more complicated
The Qualified Small Business Stock (QSBS) treatment opens the door for faster exits on growth plays (thanks to a lifetime exclusion raised to $15M, a gross asset test up to $75M, and a tiered gain exclusion of 50% at 3 years, 75% at 4, and 100% at 5). That said, eligibility remains limited — benefits apply only to original-issue stock for C-corporations, and the company must actively use at least 80% of its assets for its business to qualify.
The play: Conduct a structural QSBS audit across existing portfolio companies and pipeline deals. Ensure pre-close planning and ownership structure won’t disqualify eligibility. Adjust exit timelines to optimize for exclusion tiers.
3. 100% bonus depreciation = A tax-efficient CapEx window
With permanent bonus depreciation and domestic R&D expensing reinstated, sponsors can drive near-term tax shields for CapEx-heavy and innovation-focused companies. (Think equipment, machinery, and buildouts; automation upgrades; R&D; internal-use software development; logistics and fulfillment enhancements.) Under section 174(a) eligible investments now yield immediate deductions, strengthening after-tax cash flow. Industries such as manufacturing, logistics, consumer goods, and healthcare technology stand to benefit the most. For larger companies, however, CAMT may reduce the effective benefit.
The play: Prioritize qualifying CapEx and R&D before year-end or CAMT exposure. For larger companies, run dual modeling to assess whether deductions provide real cash benefit under both scenarios.
More context: 3 potential OBBBA headaches (and how to avoid them)
1. The state problem is coming
The Federal tax law giveth, but the states may taketh away. While the federal code offers generous treatment for depreciation, R&D, and QSBS, not all states conform. That means a portfolio company may see wildly different outcomes at the federal and state levels, which could erode the benefit realization sponsors are modeling in spreadsheets today.
The play: Work with advisors to identify state-level conformity risks. Model effective tax rates at both federal and state levels before projecting IRR impacts.
2. Cross-border structures may trigger BEAT
Sponsors with cross-border portfolio companies or intercompany financing arrangements may see heightened BEAT (Base Erosion and Anti-Abuse Tax) exposure using intercompany interest or payments.
The play: Re-review international structures. Reevaluate the tax deductibility and BEAT implications of intercompany interest and other payments in light of OBBBA.
3. The clock is ticking on renewables
Sections 45Y and 48E (Clean Electricity PTC/ITC) now sunset after 2027. Construction must begin by July 4, 2026, to claim maximum benefits. Execution delays could nullify expected incentives.
The play: Lock in projects now. Get EPC partners, land, and contracts in place before the mid-2026 deadline. Delays = lost IRR.