Virginia attorneys say One Big Beautiful Bill will affect tax, employment and immigration law

Earlier this month, President Donald Trump notched a key legislative victory for his second term with the narrow passage of a massive spending and tax bill colloquially known as the “One Big Beautiful Bill.”

The reconciliation bill, signed by Trump on July 4 after passing the U.S. House of Representatives by four votes and the U.S. Senate via a tiebreaker from Vice President JD Vance, contains hundreds of provisions that impact tax code and employment law, while also containing significant cuts to Medicaid and the Supplemental Nutrition Assistance Program, or SNAP.

With the many provisions in the legislation set to become effective in the months and years ahead, attorneys in Virginia are looking ahead to key impacts of the bill on their practices.

Changes to tax law are one of the legislation’s central aspects.

“The One Big Beautiful Bill makes some significant impacts to the tax laws, extending some of the provisions of the Tax Cuts and Jobs Act of 2017, as well as making some key new changes,” Richmond attorney Anna Derewenda said.

Key impacts for business law practitioners are tip income deduction and immigration audits, according to McLean attorney Declan Leonard. “In both instances, the name of the game under the BBB is now ‘compliance,’” Leonard said.

Bill provisions

The “One Big Beautiful Bill,” estimated to include more than 850 total pages of provisions, has aspects that affect many areas of American life.

Central to the legislation is an extension of the Tax Cuts and Jobs Act of 2017, which was due to sunset at the end of the year. Now, many of the tax cuts in the act are permanent.

The bill also increases spending for border security and defense, as well as energy production, while phasing out some of the clean energy tax credits included in the 2022 Inflation Reduction Act.

“The name of the game under the BBB is now ‘compliance.’”

— Declan Leonard, McLean

“Significant changes were also made to provisions applying to businesses conducting international operations and also those applying to individuals, such as a temporarily increased [State and Local Tax] deduction from $10,000 to $40,000 for itemizers, subject to a phase out for high earners,” Derewenda said.

Under the legislation, Medicaid faces approximately $1 trillion in cuts over the next 10 years, while some of the costs of SNAP shift to the state level, with updates to SNAP work requirements.

Richmond attorney Brydon DeWitt highlighted some changes to employee benefits law.

“The One Big Beautiful Bill Act expands the availability of ‘health savings accounts,’ a consumer-driven health care approach initially spearheaded by President George W. Bush in 2003,” Dewitt said. “Under the Act, first dollar coverage of telehealth services and certain primary care service arrangements will not disqualify an individual from contributing to a health savings account.”

DeWitt noted that under the act, individuals in a Bronze or Catastrophic plan via an Affordable Care Act Marketplace can contribute to HSA plans.

“The Act also increases dependent care flexible spending account limits and makes permanent the ability of employers to reimburse qualified student loan repayments on a tax-free basis,” DeWitt said.

“Tax lawyers should pay careful attention to effective dates, nuanced details of the rules and interactions of the rules with existing and new tax positions.”

— Anna Derewenda, Richmond

Additionally, the One Big Beautiful Bill Act modifies some aspects of executive compensation.

“The Act modifies the operation of the $1 million per individual deduction cap for certain compensation paid by publicly traded companies and their affiliates,” Richmond attorney Nona Massengill said. Massengill noted that the changes to executive compensation are “most likely to affect large tax-exempt employers.”

The legislation further struck a middle ground with Trump’s campaign promise of “no tax on tips,” introducing a $25,000 deduction cap per individual.

“So for example, a single employee earning $45,000 in wages and $20,000 in tips would report a gross income of $65,000,” Leonard said. “Under the new law, they could deduct $20,000, reducing their taxable income to $45,000.”

Significant funds in the act were earmarked for homeland security and immigration, including $45 billion for detention capacity for immigrants in custody and $30 billion denoted for U.S. Immigration and Customs Enforcement.

“An increase in enforcement means that there should be a sharp increase in I-9 audits, workplace inspections and ICE investigations across businesses of all sizes, with a focus on construction, hospitality and agriculture sectors,” Leonard said.

Client guidance

With dozens of provisions and many different effective dates contained within the act, attorneys are looking ahead to potential impacts as the One Big Beautiful Bill’s aspects become effective.

“The One Big Beautiful Bill includes many beneficial provisions, but tax lawyers should pay careful attention to effective dates, nuanced details of the rules and interactions of the rules with existing and new tax positions,” Derewenda said.

On the tip income deduction provision, Leonard said it helps low-to-mid income workers while adding a compliance burden for employers, who now must track tips closer than before.

“Employment law attorneys will need to work even closer side by side with their clients on wage/hour compliance, payroll systems and to modernize tip reporting practices to avoid IRS penalties or costly litigation,” Leonard said.

Such updates include distinguishing between direct and pooled tips, closer tracking and documentation of tip income and updates to payroll systems.

On the immigration front, Leonard said he is already seeing the effects of increased enforcement in the hospitality and construction industry.

“As an employer, you must focus on internal I-9 audits to ensure that there are no missing or incorrect forms in your system,” Leonard said. “Training HR staff to spot incomplete I-9’s and safekeeping those documents will be key to having them ready to be checked should the government pay a visit.”

Leonard said he expects the issues surrounding immigration to remain at the forefront in employment and business law.

“Certainly, as the political climate around immigration remains a hot topic, so will enforcement programs, especially in the business and employment sector,” Leonard said.

With the executive compensation aspects of the act in mind, Massengill advised that attorneys should be cognizant of changes to the Internal Revenue Code.

“Lawyers who advise public companies or tax-exempt organizations should look at these changes to Internal Revenue Code sections 162(m) and 4960 to determine whether and how their clients may be impacted,” Massengill said.

Derewenda noted that just as important for tax lawyers is being aware of changes that were not addressed on final passage of the act.

“These changes provide opportunities for tax lawyers to work with clients to determine the usefulness of new and extended elections and provisions,” Derewenda said. “The changes also provide an opportunity for lawyers to assess or reassess choice of entity questions for clients.”