Valuations in Flux: The Implications of TCJA Extension for Valuation Experts

The proposed extension of the Tax Cuts and Jobs Act (TCJA) carries significant implications for business valuation professionals. Originally enacted in 2017, the TCJA brought sweeping changes to corporate and individual tax structures, including reduced income tax rates, bonus depreciation, and the Qualified Business Income (QBI) deduction. Many of these provisions were set to expire at the end of 2025 unless extended. For valuation experts, the potential extension reshapes key valuation assumptions.

One of the most direct effects lies in the cost of capital and after-tax cash flow projections. If lower corporate tax rates continue, valuation analysts must model long-term cash flows and discount rates accordingly. A continued 21% federal corporate tax rate increases after-tax earnings, thus raising enterprise values—especially under income-based approaches like DCF and capitalization of earnings. Conversely, uncertainty over whether these provisions will sunset require sensitivity analysis and clear disclosure of assumptions.

Another critical area is pass-through entity valuation. The TCJA’s Section 199A QBI deduction effectively reduces the tax burden on eligible pass-through income, boosting value for owners. An extension of this deduction is a value driver for many business owners.

Moreover, estate and gift tax planning is also affected. The TCJA significantly increased the federal estate and gift tax exemption, currently over $13 million per individual. This will maintain favorable conditions for gifting business interests, particularly those benefiting from valuation discounts.

Valuation professionals must remain agile and informed. As policy evolves, so too must the assumptions and methodologies used in credible valuation opinions. Collaboration with tax advisors and legal counsel is essential to accurately reflect the financial reality under extended or revised TCJA provisions.

TCJA was permanently extended by Congress on July 4, 2025, when President Trumps One Big Beautiful Bill (OBBB) was enacted into law, making key TCJA provisions long-term (although some modifications were included). Core elements preserved include the following:

• Individual income tax rates and brackets, including the 37% top rate, are now permanent
• The §199A qualified business income (QBI) deduction — the 20% pass-through deduction — is now permanent
• Estate and gift tax exemptions remain at high TCJA levels and are now indexed and permanent
• Some provisions, such as AMT exemption thresholds or SALT deduction caps, included tweaks or state‑specific limits

Valuation professionals should align assumptions with the new permanent status of critical TCJA provisions and recalibrate any previous models that assumed 2026 expirations.