New Tax Rules and ISPs

The One Big, Beautiful Bill creates some significant new benefits for building broadband networks:

• Bonus Depreciation: Bonus Depreciation is a tax incentive that allows businesses to immediately deduct a significant portion of the cost of building qualified assets, instead of spreading it out over an asset’s useful life. Before OBBB, bonus depreciation was being phased out. It was at 40 percent of the cost of a qualifying asset in 2025, 20 percent in 2026, and zero in 2027. OBB resets this back to 100 percent. There is also no dollar limit on newly used bonus depreciation. Bonus depreciation can be applied to any asset with a useful life of twenty years or less. That means it can’t be applied to fiber, conduits, towers, and buildings, but can be applied to all other components of building a new fiber or wireless network. 
• Opportunity Zones: OBBB makes the Opportunity Zone program permanent. The program was set to sunset at the end of 2026. The Opportunity Zone program is aimed at promoting infrastructure investments in economically distressed areas. Qualified investments made in opportunity zones can generate deferred taxes and reduced capital gains. It’s been fairly easy to qualify fiber networks as eligible for Opportunity Zone benefits, particularly if the fiber projects were built in conjunction with other economic development initiatives.
• Interest Deductibility: OBBB permanently changes the adjusted taxable income formula used to calculate the amount of interest a business can deduct. The new formula is computed using Earnings Before Interest, Taxes, Depreciation, and Amortization, and not the more limited EBIT.