Corporations are expected to claim $16 billion in new tax breaks this year for purchases they had already made and put into use before the July passage of the Republican tax law, according to an analysis from the Joint Committee on Taxation.
The GOP tax law, the One Big Beautiful Bill Act, restored a provision that allows companies to write off the full expense of some new investments — including technology, equipment and facilities — in the first year of use. That had been allowed under President Donald Trump’s 2017 tax law, but the provision was phasing out over the last few years and was scheduled to end in 2026.
The change allows companies to get the full benefit of business deductions right away, rather than over the years in which it’s used. The idea is to encourage companies to invest in equipment that will grow their business, contributing to the economy.
But the Republican tax law made the deduction retroactive, allowing companies to deduct the full cost of purchases made and put into service since Jan. 19, the day before Trump began his second term.
The JCT, responding to a letter from Sen. Elizabeth Warren (D-Massachusetts), estimated deductions over those five months will cost $16 billion in federal tax revenue. The committee is a nonpartisan panel that produces independent analysis of tax policy and assists lawmakers in writing legislation.
“This blatant corporate handout will do nothing to encourage additional investments, as it is impossible to incentivize economic activity that has already happened,” Warren wrote in the letter.
The provision, known as 100 percent bonus depreciation, is expected to cost $362.7 billion over the next 10 years, according to the JCT. It would increase GDP by 0.4 percent over the same time frame, according to the Tax Foundation.
Policymakers sometimes make tax breaks retroactive to prevent companies from holding off on investments if they believe more favorable tax policy is coming soon. In the 2017 Tax Cuts and Jobs Act, the same provision similarly applied to investments put into use around three months before the law was enacted.
“That would defeat the purpose of incentivizing the investments. You’d get a stall in the economy as opposed to a jump-start,” said Steve Rosenthal, a former senior fellow at the Urban Institute’s Tax Policy Center, who added that the impact depends on when policymakers signaled their plans to implement a tax break.
Lawmakers began discussing the bonus depreciation provision in January, and Trump announced his intent to make the provision retroactive during his address to Congress in early March, suggesting companies may have been anticipating the change.
But others argue the retroactivity represents a giveaway to corporations that had already made an investment without the tax incentive — especially given the extremely narrow margins in Congress that made it uncertain that the bill would pass.
“It is quite obvious that if an incentive is retroactive, it is not actually an effective incentive,” said Steve Wamhoff, federal policy director at the left-leaning Institute on Taxation and Economic Policy. “You cannot change what a company did in the past, so that half-year of retroactive effect of the provision is just a windfall to companies. That part is just ridiculous.”
Companies could last deduct 100 percent depreciation up front on certain purchases from late 2017 through 2022 under the GOP tax law passed during Trump’s first term.
During that time, C corporations claimed $2.7 trillion through the tax break, according to the JCT report. Corporations making more than $1 billion claimed more than 80 percent of the deduction. In 2022, 81,000 C corporations (around 9 percent) had zero or negative taxable income because of the deduction.
Broadened to all businesses, more than 50 percent of the total deduction’s cost to the Treasury was claimed by companies making more than $1 billion. Businesses claimed $4.8 trillion through the provision during the five years it allowed 100 percent deductions.
In her letter to the JCT, Warren argued the provision is “ineffective tax policy,” with little evidence it “is anything but a massive windfall to large corporations.”
Defenders of the tax break argue it incentivizes investment. Erica York, vice president of federal tax policy at the center-right Tax Foundation, said the provision accurately reflects the up-front cost of making investments.
“A tax system that requires depreciation over time will understate businesses’ real costs, overstate real profits, and, as a result, artificially increase tax liability,” she said.
The right-leaning American Enterprise Institute argued that the largest companies benefit because they account for a disproportionate share of investments.
“Those three business taxes that are now permanent are a big part of what is going to generate that capital formation in this country and help us grow back to the strength we did when we originally passed the (Tax Cuts and Jobs Act),” said Senate Finance Committee Chairman Mike Crapo (R-Idaho) in a June interview on Fox Business, referring to the bonus depreciation provision and two other business tax breaks in the One Big Beautiful Bill Act.
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