By Jasmyne Saucedo
The passage of the One Big Beautiful Bill Act (OBBBA) marks a pivotal moment for the franchise industry. With sweeping tax reforms and strategic incentives, this legislation is poised to reshape how franchisors and franchisees operate, invest, and grow.
Whether you're a seasoned brand leader or a first-time franchisee, understanding the implications of this bill is essential to capturing its benefits.
A new era of tax relief
At the heart of the OBBBA is a robust package of tax provisions designed to stimulate small business growth. Among the most impactful changes:
Expanded bonus depreciation
Franchises can now fully deduct the cost of qualifying property, including equipment and renovations, for qualifying property acquired and placed in service after January 19, 2025. This accelerates ROI and encourages reinvestment in infrastructure and mobility.
Section 179 expensing expansion
The bill increases the limits for immediate expensing of business assets, allowing franchisees to write off more capital investments without waiting for multi-year depreciation schedules.
Pass-through deduction extension
The continuation of the 199A deduction enables LLCs and S corporations — common entity structures in franchising — to deduct a portion of their income, reducing taxable earnings and improving cash flow.
Relief for frontline workers
Franchise employees stand to benefit directly from the bill’s provisions:
- Federal income tax deduction on tips and overtime pay — This change boosts take-home pay for millions of workers in restaurants, retail, hospitality, and home services.
- W-2 reporting adjustments — Enhanced treatment of overtime and tips simplifies payroll compliance and improves transparency.
Strategic planning for owners
Individuals must act swiftly to align their strategies with the new tax landscape. Key considerations include:
- SALT cap increase — The bill raises the state and local tax (SALT) deduction cap from $10,000 to $40,000, prompting a reevaluation of federal and state tax planning.
- Opportunity Zones revitalization — Renewed incentives for investing in designated zones offer franchisors a chance to expand into underserved markets while benefiting from tax deferrals and exclusions.
- Estate and gift tax exemption — Lifetime exemption increases to $15 million starting in 2026, with inflation adjustments.
What you should do now
- Educate and engage your team and advisors — Make sure your business advisors are on the same page and are aware of the recent changes.
- Review your tax and business strategy — Consult with your CPA or tax advisor to model the impact of the bill on your business.
For more information on tax and business strategy, contact Rachael O’Leary at [email protected] or 630-368-3657 or Jasmine Saucedo at [email protected] or 208-387-6413.
The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting, investment, or tax advice or opinion provided by CliftonLarsonAllen LLP (CLA) to the reader. For more information, visit CLAconnect.com.
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