How OBBB Reshapes Entity & Trust Strategy
Entities (LLCs, corporations) and trusts should especially pay attention to three major changes:
1. Research & Experimental Expenditures (§174, §174A)
- OBBB introduced election rules allowing small business taxpayers to elect to deduct or amortize domestic research or experimental (R&E) expenditures incurred after Dec 31, 2021. They can use §174A for certain amortization approaches. (irs.gov)
- Rev. Proc. 2025-28 provides automatic consent for eligible taxpayers to change accounting methods to adopt §174A or amortize as required. Deadlines: one year after enactment (so generally by July 6, 2026). (irs.gov)
2. Trusts & Safe Harbor for Digital Assets Management
- Rev. Proc. 2025-31 establishes a safe harbor for trusts that qualify as investment trusts under §301.7701-4(c) and as grantor trusts, permitting them to stake digital assets without risking loss of those designations. Trusts can also amend governing instruments within a limited period to adopt this safe harbor. (irs.gov)
3. New Reporting & Deduction for Car Loan Interest: Entity Implications
- New information reporting obligations under section 6050AA, for entities receiving interest on “specified passenger vehicle loans” from individuals (amounts ≥ $600), as part of deduction for qualified passenger vehicle loan interest. Entities must issue statements or online portals detailing interest received for individuals to claim their deduction (2025 transition relief in effect). (irs.gov)
Comparative Example: LLC vs C-Corporation vs Trust
| Structure | Treatment of R&E Costs | Reporting for QPVLI Interest | Effect of Safe Harbor for Digital Assets |
|---|---|---|---|
| Small LLC (pass-through) | Eligible to elect under §174A; can deduct or amortize as per Rev. Proc. 2025-28. | If the LLC receives $600+ interest on a vehicle loan from individual, it must report it under §6050AA; furnish statement. | If trust, safe harbor helps preserve investment/trust status if stake digital assets. LLCs pass to members. |
| C-Corporation | Same elections allowed. | Reports as trade or business recipient. | Digital assets under trust rules apply if trust holds shares or assets. |
| Trust | Trusts with R&E activities must evaluate method elections (if applicable). | If trust receives interest from qualified vehicle loans, same requirements. | Safe harbor under Rev. Proc. 2025-31 protects status when staking digital assets. |
Best Practices Moving Forward
- Entities should evaluate whether they meet eligibility to elect under §174A; assess whether deducting immediately or amortizing aligns with long-term plans.
- Trusts should review their governing instruments and consider amendments to adopt digital asset safe harbor before the deadline.
- Prepare internal accounting and finance systems to capture vehicle loan interest received from individuals (names, amounts, VINs) so statements can meet requirements or use transition relief in 2025.
Why It’s All Connected
These entity-level changes influence:
- Tax timing and cash flow (e.g. accelerating or deferring deductions for R&E expenditures);
- Legal and compliance risk, especially for trusts handling digital assets without clear safe harbor;
- Administrative burden on entities receiving or paying vehicle interest or facilitating claiming deductions for individual owners/employees.
Entity choice now influences access to deductions and reporting obligations more than ever. Those who begin planning now will be better positioned for compliance and benefit in 2026.