The OBBB and Your Fuel Business: A Summary

by Marty Kirshner, CPA, MSA & Brad Carlson, Gray, Gray & Gray, LLP

As delivered fuel businesses reap significant tax advantages, they will also need to adjust to changing competitive dynamics

Bottom Line Up Front: The One Big Beautiful Bill Act (OBBB), signed into law on July 4, 2025, offers significant tax advantages for delivered fuel businesses through enhanced capital expensing provisions, permanent pass-through deductions, and improved business interest deductibility. However, dealers must also navigate the termination of certain energy efficiency credits that previously benefited their customers and adjust to changing competitive dynamics in the energy marketplace.

The One Big Beautiful Bill Act represents the most comprehensive tax overhaul since the Tax Cuts and Jobs Act (TCJA) of 2017, making most TCJA provisions permanent while introducing new business-friendly measures that will substantially impact the delivered fuel industry. For propane and heating oil dealers – businesses that form the backbone of energy distribution to millions of American homes and commercial properties – these changes present both unprecedented opportunities and strategic challenges that require immediate attention.

Major Tax Benefits for Energy Businesses

100% Bonus Depreciation Restored Permanently
The most significant immediate benefit for propane and heating oil dealers is the permanent restoration of 100% bonus depreciation for qualifying property acquired on or after January 20, 2025, eliminating the previously scheduled phase-down that would have reduced the benefit to 40% in 2025, 20% in 2026, and 0% thereafter. This provision is particularly lucrative for capital-intensive industries like fuel distribution, allowing companies to write off 100 percent of capital expenditures such as equipment and infrastructure in the first year costs are incurred rather than over the life of the asset. For a typical heating oil or propane dealer investing $500,000 in new delivery trucks, this represents an immediate tax deduction rather than depreciation spread over multiple years.

Direct Impact on Operations:

• Delivery trucks and tank vehicles: Complete first-year write-off of new fleet additions
• Storage tanks and terminal equipment: Immediate expensing of tank installations and upgrades
• Dispensing equipment: Full deduction for pump systems, meters, and loading equipment
• Technology infrastructure: Complete write-off of inventory management systems, route optimization software, and customer management platforms

Enhanced Manufacturing Building Expensing
The OBBB significantly expands bonus depreciation eligibility by including “qualified production property” – nonresidential real property used in manufacturing, production, or refining of tangible personal property. For larger fuel distributors with blending facilities, propane processing plants, or heating oil storage and distribution centers that began construction after December 31, 2024, and are placed in service before January 1, 2034, this expansion allows immediate expensing of facility construction and major renovations that support manufacturing or processing activities.

Permanent Pass-Through Business Deduction Enhancement
The law makes the 20% deduction for pass-through business income permanent and enhances the qualified business income (QBI) provisions. Since many propane and heating oil dealers operate as partnerships, S-corporations, or sole proprietorships, this provides lasting tax relief.

Business Interest Deduction Improvements
The OBBB reinstates the more generous definition of “adjusted taxable income” (ATI) for calculating business interest expense limitations under Section 163(j). Under the Bill, ATI is computed without regard to deductions for depreciation, amortization, and depletion, significantly increasing the allowable business interest deduction. This more favorable method, which initially applied under the TCJA but expired at the end of 2021, is now permanent beginning in 2025.

For fuel dealers who often carry significant debt to finance inventory, equipment, and seasonal working capital needs, this change substantially improves cash flow for debt service and expansion financing by allowing greater deductibility of interest expenses.

Research and Development Expensing Restored
A major win for innovative fuel distributors is the restoration of immediate deductibility for domestic research and experimental expenditures, effective in 2025. Under the TCJA, these expenses had to be amortized over five years starting in 2022. For companies developing new fuel management technologies, efficiency systems, or customer service innovations, this change allows immediate expensing rather than spreading deductions over multiple years. Small businesses with average annual gross receipts of $31 million or less can apply this favorable treatment retroactively to 2022.

Strategic Planning Opportunities for Energy Companies

Capital Investment Timing
With 100% bonus depreciation now permanent, fuel dealers should strategically plan major capital expenditures to maximize tax benefits. Priority considerations include:

1. Fleet modernization: Upgrading to more efficient delivery vehicles
2. Storage capacity expansion: Installing additional tank capacity to handle volume growth
3. Technology integration: Implementing advanced route optimization and customer management systems
4. Environmental compliance: Investing in leak detection systems and environmental monitoring equipment

Pass-Through Structure Optimization
The permanent nature of enhanced pass-through deductions provides certainty for long-term business planning. Dealers should work with tax advisors to:

• Optimize entity structure to maximize QBI benefits
• Plan income timing to stay within deduction limitations
• Consider expansion strategies that leverage favorable pass-through treatment

Working Capital Management
The enhanced business interest deduction rules particularly benefit seasonal businesses like heating oil dealers, who require significant working capital financing during summer months for winter inventory buildup. The improved ATI calculations reduce the tax cost of carrying this seasonal debt.

Equipment Replacement Programs
With permanent 100% bonus depreciation, dealers should establish systematic equipment replacement programs that optimize both operational efficiency and tax benefits. Consider:

• Planned replacement schedules for delivery vehicles to maximize both reliability and tax advantages
• Technology upgrade cycles that align with rapid changes in fuel management and customer service systems
• Infrastructure modernization programs that improve operational efficiency while generating immediate tax benefits

Challenges and Competitive Impacts

Loss of Customer Energy Efficiency Incentives
The OBBB eliminates several tax credits that previously benefited fuel dealers’ customers, which may impact demand patterns. Various clean energy tax credits are terminated or face accelerated phase-outs, including the Section 30D clean vehicle credit and Section 45W qualified commercial clean vehicles credit (both effective after September 30, 2025). Additionally, wind and solar projects face earlier phase-out deadlines, with investment and production tax credits requiring placement in service by December 31, 2027, unless construction begins within 12 months of the bill’s enactment.

Market Implications:

• Reduced customer incentives for clean energy alternatives may benefit traditional fuel dealers
• Commercial customers may delay facility upgrades that include renewable energy systems
• Accelerated phase-out of electric vehicle incentives may extend the lifespan of traditional heating fuel demand

Personal Tax Implications for Business Owners

Estate Tax Exemption Increases
The OBBB increases the estate tax exemption to $15 million per individual ($30 million for married couples), providing significant benefits for family-owned fuel distribution businesses. This change is particularly important for the delivered fuel industry, where many operations are multigenerational family enterprises. The increased exemption allows for more efficient succession planning and reduces the tax burden on transferring business ownership to the next generation.

SALT Cap Relief
The temporary increase in the State and Local Tax (SALT) deduction cap from $10,000 to $40,000 (2025-2029, reverting to $10,000 in 2030) provides meaningful relief for fuel dealers operating in high-tax states. This change is particularly beneficial for business owners in states like New York, New Jersey, Massachusetts, and Connecticut. For multi-state operators, this creates strategic income allocation opportunities across different tax jurisdictions. The cap amount increases by 1% annually starting in 2026, but is reduced for taxpayers with modified adjusted gross income over $500,000.

Enhanced Benefits for Working Americans
The Bill includes temporary provisions benefiting employees in the fuel distribution industry. A deduction of up to $12,500 for qualified overtime compensation ($25,000 for joint filers) applies from 2025 through 2028. This “above-the-line” deductions phases out for higher-income taxpayers but provides meaningful tax relief for drivers, technicians, and service personnel who often work overtime during peak heating season.

Action Items for Fuel Dealers

Immediate Actions (Next 90 Days)

1. Evaluate pending capital expenditures to maximize 100% bonus depreciation benefits
2. Review entity structure with tax advisors to optimize pass-through deduction benefits
3. Assess competitive positioning in light of reduced clean energy incentives
4. Update financial projections to reflect improved tax position

Medium-Term Planning (Next 12 Months)

1. Develop systematic capital replacement programs that optimize tax benefits
2. Explore market expansion opportunities enhanced by favorable tax treatment
3. Evaluate acquisition opportunities with improved cash flow from tax savings
4. Implement technology upgrades that qualify for immediate expensing

Long-Term Strategic Considerations

1. Monitor regulatory developments as environmental policies continue evolving
2. Develop competitive responses to changing energy marketplace dynamics
3. Plan for SALT deduction reversion in 2030
4. Consider geographic expansion opportunities enhanced by improved tax position

Mostly Good News... If You Plan Accordingly

The One Big Beautiful Bill Act represents a watershed moment for the delivered fuel industry, providing substantial tax advantages that can spur growth, modernization, and competitive positioning. The permanent restoration of 100% bonus depreciation, enhanced pass-through deductions, and improved business interest rules create a favorable environment for capital investment and business expansion. However, success requires proactive planning to maximize these benefits while adapting to the evolving competitive dynamics in the energy marketplace. Dealers who act quickly to optimize their tax strategies and leverage the improved business environment will be best positioned to thrive in this new regulatory landscape.

The key to success lies in immediate action to capture available benefits, thoughtful long-term planning to adapt to regulatory changes, and continued focus on operational efficiency and customer value creation. Fuel dealers who embrace these changes proactively will find themselves well-positioned for sustained success in the years ahead.

Marty Kirshner is a Partner and leads the Energy Practice Group, and Brad Carlson is a Tax Partner at Gray, Gray & Gray, LLP, a business consulting and accounting firm that serves the heating oil and propane industry. They can be reached at (781) 407-0300 or info@gggllp.com.

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