The beginning of the fourth quarter is a useful time for businesses to review their current tax situation and consider what they are doing, or could be doing, to reduce their tax liability for the year.
Even with so much still changing, taking action now can help businesses prepare for the months ahead and make use of available tax strategies. Here are four tax strategies businesses should consider as they approach the end of the year.
Corporate charitable deductions
Businesses that make charitable contributions should consider planning ahead to avoid losing valuable deductions under changes included in the One Big Beautiful Bill Act, or OBBBA.
Starting in 2026, corporations will be able to deduct charitable contributions only to the extent that those contributions exceed 1% of adjusted gross income, or AGI, while also remaining within the 10% AGI limit that applies to the corporate charitable deduction. Amounts that do not meet these requirements could be disallowed and lost.
An opportunity to treat certain contributions as business expenses
There could be another way to account for some of these payments when the circumstances support it. A contribution might qualify as a business expense when there is a direct connection between the payment and the taxpayer’s trade or business, along with a reasonable expectation that the contribution will provide the business with a financial benefit equal to or greater than the amount given.
Something to think about: Businesses should consider whether any planned contributions could meet these requirements before the end of the year.
Tariff refunds
Tariffs continue to create uncertainty for businesses involved in importing and exporting goods. Despite the Supreme Court’s decision to strike down tariffs in Learning Resources, Inc. v. Trump, the Trump administration has indicated that it intends to continue using tariffs, leaving businesses to contend with an ongoing and changing situation.
In the meantime, businesses should consider whether they can file claims under the International Emergency Economic Powers Act, or IEEPA, along with other available strategies.
Importers could potentially recover up to 99% of duties, taxes and fees paid on imported merchandise that is later exported, remains unused, is destroyed or becomes part of products that are ultimately exported.
A new process for IEEPA refund requests
U.S. Customs and Border Protection, or CBP, has introduced a digital process called CAPE, which stands for Consolidated Administration and Processing of Entries. The system operates through the Automated Commercial Environment, or ACE, portal, and it’s designed to handle IEEPA refund requests.
Something to think about: Businesses that paid duties, taxes or fees on qualifying imported goods should review whether they have an opportunity to seek a refund.
Qualified small business stock
The OBBBA also introduced changes affecting qualified small business stock, commonly referred to as QSBS. For eligible taxpayers, QSBS can provide an opportunity for tax-free appreciation.
In general, non-corporate taxpayers can exclude 100% of the gain from QSBS held for five years, subject to applicable limits. The OBBBA established new rules for stock issued after July 4, 2025.
Changes to the QSBS rules
Under the updated rules, taxpayers can receive a 50% exclusion for qualifying stock held for at least three years. That exclusion increases to 75% when the stock is held for at least four years.
The law also increases the maximum amount of gain that can be excluded from $10 million to $15 million. In addition, the maximum amount of gross assets a business can have immediately before and after the stock is issued increases to $75 million.
Pay attention to eligibility requirements
QSBS comes with important restrictions concerning business activities and the use of business assets. Because those requirements can affect whether stock qualifies for the tax benefits, businesses should carefully review the applicable rules and requirements.
Something to think about: The potential tax benefits of QSBS make it particularly important to understand the eligibility requirements before relying on the exclusion.
Research and experimentation credits
Another area businesses should review involves research and experimentation, or R&E, costs, which are also commonly referred to as research and development, or R&D, costs.
Under the OBBBA, taxpayers are required to expense domestic R&E costs in the year those costs are incurred rather than amortizing them over five years. The change represents a significant shift from the rules that applied from 2022 through 2024 and reflects a change that many businesses had sought.
Foreign R&E costs remain subject to different treatment. Those costs must continue to be capitalized and amortized over a period of 15 years.
Understanding which R&E expenses qualify
Determining which expenses qualify for the applicable treatment requires careful attention to the rules. In general, an expense must satisfy the IRS definition of a qualified research expense and meet each part of a four-part test.
The expense must first be eligible for a Section 174A deduction. This means the R&E expense must be incurred in connection with the taxpayer’s trade or business and must involve research conducted within the United States.
The research must also satisfy the technological information test. Qualifying research must seek to discover technological information intended for use in developing a new or improved business component. The research does not have to succeed for the activity to satisfy this part of the test.
The qualifying activities must also be part of a process of experimentation. The experimentation must relate to developing a new or improved function, performance or reliability, with the goal of discovering information that can be useful in developing a new or improved business component.
Finally, the qualification tests must be applied separately to each business component. Something to think about: The expense must satisfy the IRS definition of a qualified research expense under IRC Section 41.
Why proactive tax planning matters
Inflation, geopolitical developments and other economic factors can make it difficult to determine which tax strategies will have the greatest impact on a particular business. There are additional strategies beyond those discussed here that could be relevant, depending on a company’s circumstances.
That uncertainty makes proactive planning even more important. Seeking professional tax advice, considering different scenarios and keeping an eye on legislative changes can help a business prepare for potential changes and work toward minimizing its tax liability.
Remember that federal tax law is only part of the picture
This article addresses federal tax law only. State tax laws can also affect the decisions a business makes. For example, federal law could require a business to expense R&E costs while a state requires those same costs to be amortized.
When federal and state requirements differ, businesses may need to maintain separate records and procedures to account for the different treatments.
Tax rules can change, and the requirements surrounding deductions, credits and other tax strategies can be detailed. Businesses should consult with a qualified tax adviser about how these rules apply to their individual circumstances.
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