IFA IS FIGHTING FOR YOUR TAX RELIEF
IFA supports policies that foster competitiveness and expand eligibility for America’s 831,000 franchise small businesses to deduct business growth expenses from their tax obligations.
The “One Big Beautiful Bill Act (OBBBA)” was signed into law on July 4, 2025. Franchisors, franchise owners and franchise employees now have certainty that key tax levels will remain to support their businesses and encourage future growth.
IFA is grateful to our franchisee, franchisor and supplier members for advocating for these policies and supporting the efforts of our Advocacy Team. You can find current law descriptions of the tax provisions for which IFA advocated below.
Below are the ongoing tax priorities for IFA and its members:
Section 199A
Section 199A provides pass-through businesses with a 20% deduction for qualified business income. The OBBBA makes this deduction permanent and expands deduction limit ranges in addition to introducing a minimum deduction for taxpayers. The provision eases the impact of current tax and wage limitations for Specified Service Trade or Businesses (SSTB) and pass-through entities.
Bonus Depreciation
This OBBBA provision permanently extends and modifies the additional first-year depreciation deduction allowing businesses to immediately write off the cost of eligible property acquired and placed in service. The allowance is increased to 100 percent for property acquired and placed in service on or after January 19, 2025, as well as for specified plants planted or grafted on or after January 19, 2025. The enshrinement of this provision allows businesses to deduct their research and development expenses.
Maintaining EBITDA Interest Deductibility
Debt financing is important to franchise businesses in supporting capital investments, growth, and job creation across many business lines in franchising. The OBBBA increases the cap on deductibility of business interest expense for taxable years beginning Jan 1, 2025 by factoring in depreciation, amortization or depletion. The provision also expands the definition of “motor vehicle” to include trailers and campers designed to be towed by or affixed to a motor vehicle. This change allows interest on floor plan financing for such trailers and campers to be deducted.
Permanent Estate & Gift Tax Relief
IFA’s engagement in TCJA helped secure a permanent $5 million exemption, spousal transfer and stepped-up basis that was originally passed as part of the American Taxpayer Relief Act of 2012. The OBBBA provision permanently extends the lifetime gift tax exemption and indexes the amount for inflation thereafter.
No Taxes on Tips
This new OBBBA provision provides an above-the-line deduction of up to $25,000 for qualified tips received by both W-2 employees and 1099 contractors, phasing out at modified AGIs above $150,000 if filed individually or $300,000 jointly. The 3 years of “Qualified tips” must be voluntary, non-negotiable, payor-determined and reported with the recipient’s SSN. Effective in tax years 2025–2028, the provision also extends the employer-side FICA credit under Section 45B to beauty and salon services.
No Tax on Overtime
This new provision lets workers deduct up to $12,500 (or $25,000 for joint filers) of overtime pay on their 2025–2028 returns, regardless of itemization. To qualify, the overtime must be reported separately on Form W-2 and the filer (and spouse, if married) must include their SSNs. The deduction phases out when modified AGI exceeds $150,000 (or $300,000 for joint returns).
Foreign-derived intangible income (FDII)
The OBBBA makes permanent a 33.34% deduction for certain foreign-derived income of US corporations (currently referred to as foreign-derived intangible income (FDII) and renamed foreign-derived deduction eligible income). The FDII is critical to more than 250 U.S.-based franchise brands that have an international presence.
You can read IFA’s analysis of each of these provisions here.
Other ongoing tax priorities:
Work Opportunity Tax Credit (WOTC)
The WOTC is a federal tax credit available to employers for hiring and employing individuals from certain targeted groups who have faced significant barriers to employment. IFA supports the Improve and Enhance the Work Opportunity Tax Credit Act (S.492/H.R. 1177) which enhances the WOTC program. Key provisions include increasing the credit percentage from 40% to 50% of qualified wages and adding a second credit level for employees working 400 or more hours.
Veteran Tax Credit
With the goal of alleviating barriers to entry in franchising, IFA proudly advocates for tax credits to minority groups and veterans seeking to overcome the initial financial hurdles to owning and operating a franchise. IFA supports the Veteran Entrepreneurs Act (H.R. 3214), which would provide a qualified veteran with a 25% tax credit on the initial franchise fee and significantly lighten the financial burden of starting their own business.
