Research and experimental expenditures
The Act restores full expensing for domestic research and experimental (R&E) expenditures through new section 174A. The Act also allows taxpayers to deduct certain remaining unamortized amounts from earlier years. For digital asset firms engaged in protocol development or blockchain innovation within the United States, this change offers immediate tax relief. However, foreign R&E remains subject to a 15-year amortization period. Additionally, the decisions between immediate expensing and amortization could have other tax implications (e.g., application of the Corporate Alternative Minimum Tax). Companies should undertake a modeling exercise to weigh the pros and cons of these new provisions.
At the state level, the impact will depend on how each jurisdiction conforms to the Code. States that adopt section 174A either on a rolling basis or by updating their conformity to the Code may allow immediate expensing of domestic R&E, but others may continue to require amortization, creating mismatches in timing and deductions. Additionally, states that conform to the federal treatment of foreign R&E could face constitutional scrutiny if they provide favorable treatment to domestic activities, particularly in the context of globally distributed digital asset development teams.
Bonus depreciation and immediate expensing
The Act permanently reinstates 100% bonus depreciation. Mining companies, for example, may stand to benefit from the ability to immediately expense the cost of mining servers and data center infrastructure. Exchanges investing in server farms or security infrastructure may also see improved cash flow and reduced taxable income in the year of acquisition.
However, the state level impact is more nuanced. Many states do not conform to federal bonus depreciation rules and instead require taxpayers to add back the federal deduction and depreciate assets over a longer period. As a result, while digital asset companies may benefit from immediate expensing at the federal level, they could face higher taxable income in non-conforming states, creating timing differences and added complexity in multistate reporting.
Business interest expense deductions
Another notable change is the return to an earnings before interest, taxes, depreciation, and amortization (EBITDA) based limitation for business interest deductions under section 163(j). This is especially relevant for digital asset lenders, exchanges, and mining operations that rely on debt financing or companies that are undergoing financing for purposes of capital investment or M&A. By providing a broader base for calculating the limitation, and therefore allowing for more generous interest deductions, the Act may ease the tax burden on companies with significant capital expenditures or token-backed lending structures. The Act's exclusion of certain foreign income in the adjusted taxable income (ATI) calculation, however, may be harmful to certain companies.
At the state level, the impact will vary depending on conformity to section 163(j). States that follow the federal EBITDA-based limitation may see reduced taxable income for capital intensive digital asset companies. However, states that decouple from this provision or apply their own limitations could create mismatches, requiring careful tracking of interest deductions across states.
Rewriting Global Intangible Low-Taxed Income (GILTI) and Foreign Derived Intangible Income (FDII)
There have been changes with respect to the FDII and GILTI regimes, which were introduced as part of the Tax Cuts and Jobs Act during President Trump's first term. These provisions encourage sales and services made from the United States and tax all of the foreign income earned by certain US-owned foreign companies, respectively. For digital asset companies with offshore entities, such as exchanges operating in foreign jurisdictions with favorable tax regimes or digital asset companies that provide products and services to foreign customers, these changes need to be modeled to understand their full impact.
These federal changes will also ripple through to state tax systems, particularly in states that conform to the Code on a rolling basis. Given the patchwork nature of state conformity, digital asset companies operating in multiple jurisdictions will need to closely monitor how each state responds to the Act's changes and whether legislative decoupling or conformity updates are enacted.
State and Local Tax (SALT) deduction
On the individual side, the Act temporarily raises the SALT deduction cap to USD 40,000, with an income-based phase-down for high earners. While this change may offer some relief to cryptocurrency founders and investors in high-tax states, the real story is what the bill doesn't do, i.e., it leaves the pass-through entity tax workaround untouched. This means that cryptocurrency startups structured as limited liability companies or partnerships can continue to shift state tax burdens to the entity level, preserving deductibility and reducing federal tax exposure.
Other general changes
The Act introduces a new excise tax on certain remittance transfers, which could have implications for digital asset companies, particularly those involved in cross-border payments or payment processing. The definition of "remittance transfer," "remittance transfer provider," and "sender" are drawn from the Electronic Fund Transfer Act and generally include an electronic transfer of funds initiated by a consumer in the US provided by a person or financial institution (i.e., remittance transfer provider (exclusions exist)), which can include banks and money transmitters, and the tax is collected by that remittance transfer provider. Such transfers are usually cross-border as indicated in the Electronic Fund Transfer Act. The Act limits the excise tax to "cash, a money order, a cashier's check, or any other similar physical instrument (as determined by the Secretary) to the remittance transfer provider." Cryptocurrency/digital assets should fall outside of the above provision absent any broad regulatory interpretation by the Treasury Department.
Lastly, the Act also includes two headline-grabbing provisions: an exclusion from income tax for tips and a similar exclusion for overtime pay. These provisions are aimed at providing relief to service workers and hourly employees, and they may have downstream effects for digital asset companies that rely on independent contractors, hourly developers, or gig-based contributors, especially in decentralized environments. While the exclusions themselves apply to individual taxpayers, companies may need to adjust payroll systems, tax reporting, and compensation planning accordingly.
Looking ahead: GENIUS, CLARITY, and Lummis bills
The Act comes amid a broader push to define the future of digital assets. In a historic move, US House of Representatives leadership has declared the week of July 14, 2025 as "Crypto Week," during which the House will consider landmark bills, such as the Digital Asset Market Clarity Act of 2025 (CLARITY) Act and the US Senate's Guiding and Establishing National Innovation for US Stablecoins Act (GENIUS) Act, among others. These bills aim to establish a comprehensive regulatory framework for digital assets, safeguard financial privacy, and position the United States as the global leader in Web3 innovation. As Speaker Mike Johnson stated, this is part of "delivering the full scope of President Trump's digital assets and cryptocurrency agenda."
The GENIUS Act passed by the US Senate on June 17, 2025, and the US House of Representative on July 17, 2025, will go to President Trump's desk for signature. The GENIUS Act represents the most comprehensive federal framework to date for regulating payment stablecoins in the US.
The CLARITY Act also passed the US House of Representatives on July 17, 2025, and will now be considered before the US Senate. The CLARITY Act aims to bring structure to digital asset regulation by clearly defining terms like "digital commodity" and "mature blockchain system," and by establishing when tokens are no longer securities.
Finally, Senator Cynthia Lummis (R-WY) introduced another version of her various cryptocurrency bills proposing a comprehensive overhaul of how digital assets are taxed.
We will continue to monitor these bills and provide an update on any major developments.
