What Does the Proposed H.R. 1 Bill Mean for Business Owners and Employers in the Real World?

Dianna Jennings
Jun 9
3 min read

The proposed H.R. 1 bill, informally known as the "One Big Beautiful Bill," has generated considerable attention since its introduction. Aimed at reforming various economic structures, this legislation is set to impact business owners and employers throughout the country. In this blog post, we will go through a few of the items that could impact you as a business owner and/or employer.

Please note though that these are overhead reviews and interpretations of a proposed bill and do not represent the end result of the bill after voting and modifications. This blog should also not replace tax advice from your trusted advisor.

Summary of Key Provisions for Employers & Small Business Owners – H.R. 1 (119th Congress)

The "One Big Beautiful Bill Act" (H.R. 1) includes several tax-related provisions aimed at supporting employers, expanding benefit options, and encouraging workforce participation. Below is a summary of the most relevant changes for small business owners and employers.

Proposed Impacts to Business Owners and Employers

Enhanced Childcare Credit (Sec 110105)

Employers can now claim a credit of 40%, or 50% for small businesses, on qualifying childcare expenses.
Annual expense caps are $500,000 ($600,000 for small businesses), adjusted for inflation.
Eligible expenses include onsite facilities, contracting with providers, subsidies, and startup costs.
The credit is nonrefundable and can be carried forward up to 20 years (congress.gov).

CHOICE Arrangement (Secs 110201–110203)

Formerly Individual Coverage HRAs, This arrangement would allow employers to fund employees’ individual health plans.
Small business tax credit: $100/month per enrolled employee in Year 1, $50/month in Year 2 (myconvergence.bna.com).
Provides a flexible alternative to traditional group health insurance.

Tip & Overtime Deductions (Secs 110101–110102)

A new above-the-line deduction allows employees to deduct tip and overtime income, with no direct changes required from employers (jdsupra.com, ballotpedia.org).
HR Perspective: This may help improve hiring and retention in service-heavy sectors, including construction where overtime can be common during busy seasons or where there are staffing shortages. However, this could increase employer payroll costs and there is concern it could result in lower regular wages to make up for the increased overtime pay. It could also impact advocacy efforts for tipped workers to receive higher minimum wages.

HSA Eligibility Expansion (Secs 110204–110207)

Expands Health Savings Account eligibility to:
- Individuals over 65 on Medicare Part A.
- Those in direct primary care arrangements (up to $150/month).
- Individuals on bronze-level or catastrophic exchange plans.
Also allows HSAs in conjunction with employer on-site clinics (congress.gov).
HR Perspective: Employers may benefit from increased HSA enrollment and associated tax advantages.

Business Tax Changes & Credits

1. Qualified Business Income (QBI) Deduction Expansion

The passthrough business tax deduction is increased from 20% to 23% and made permanent.
This benefits owners of LLCs, S-corps, partnerships, and other pass-through entities.

2. Bonus Depreciation & R&D Expense Restoration

100% bonus depreciation on new equipment and property investments is reinstated through 2029.
Research and experimentation (R&E) expenses can again be immediately expensed (not amortized) from 2025 to 2029.

3. Employee Retention Credit (ERC) Modification

ERC claims filed after January 31, 2024 become disallowed, and IRS audit timelines are extended up to 6 years.
Retroactive penalties may apply for promoters of fraudulent ERC claims.

4. SALT Deduction Cap & IV Changes

SALT deduction cap raised to $40,000 for joint filers, phasing out above $500,000 AGI.
Special rules apply to specified service trades or businesses impacting pass-through owners.

5. Form 1099 Reporting Thresholds Adjusted

The 1099-K threshold returns to $20,000 & 200 transactions.
Starting 2026, the $600 1099-MISC threshold is indexed for inflation.

6. BEAT, GILTI, FDII Tweaks (For Larger Businesses)

The BEAT surtax penalty target rate increases slightly (~10–12.5%).
GILTI and FDII deductions adjust marginally (GILTI from 50% to ~49.2%, FDII from 37.5% to ~36.5%).

The Road Ahead

While we understand this proposed bill comes amidst significant political divide, we do not aim to endorse or criticize any of the items summarized in this post. Many of these proposed changes may face updates as the bill moves through the Senate and the final result could be much different than what we are seeing now.

However, we believe it's important to research the potential impacts, good and bad, that this bill may have on your business. Some items won't be relevant, while others could aid in employee retention and morale while potentially increasing the need of your business to invest more into human resources and compliance.