OBBBA 2026: How to Account for Uncertain Tax Positions

The One Big Beautiful Bill Act did not arrive with a clean implementation manual. Enacted July 4, 2025, it dropped several provisions into the 2026 tax year while the IRS and Treasury are still issuing guidance on how those provisions actually work. For tax directors and CFOs preparing 2026 income tax provisions, that gap between statutory text and final regulatory clarity is exactly where uncertain tax positions (UTPs) live under ASC 740-10.

This walkthrough maps the specific OBBBA provisions most likely to generate UTPs in 2026, explains how to apply the recognition and measurement framework under ASC 740-10, and covers the Schedule UTP disclosure mechanics that follow. It is written for the person sitting down to build the 2026 annual provision, not for someone looking for a summary of what the OBBBA changed.

Key takeaway: Several OBBBA provisions effective for tax years beginning after December 31, 2025 carry genuine recognition-threshold uncertainty because final IRS guidance is still pending. Treating these as settled positions without a documented more-likely-than-not analysis is the primary audit risk heading into year-end.

Which OBBBA Provisions Create Uncertain Tax Positions in 2026?

Not every OBBBA change generates a UTP, but several do, and they cluster around four areas: the new charitable contribution floor, the expanded Section 162(m) controlled group rules, the CAMT interaction with permanent bonus depreciation, and the novel Section 274(o) meal deduction exception.

Here is a quick-reference map before the detail:

OBBBA ProvisionIRC SectionUTP TypeGuidance Status (as of Q1 2026)1% charitable contribution floorSection 170Permanent difference / recognitionPendingControlled group 162(m) aggregationSection 162(m)Permanent difference / measurementPendingARPA 162(m) expansion (2027 effective)Section 162(m)DTA classificationPendingBonus depreciation + CAMT interactionSections 168(k), 55Temporary difference / CAMT UTPPartial (CAMT notices)Section 274(o) restaurant/fish exceptionSection 274(o)RecognitionPendingNCTI/GILTI restructuringSections 951A, 59AInternational UTPPartial

RSM US's Q1 2026 ASC 740 analysis confirms that "the IRS and the U.S. Department of the Treasury continue to issue guidance regarding the implementation of the OBBBA" and that several provisions now effective in 2026 require careful provision analysis.

Step 1: Apply the ASC 740-10 Recognition Threshold to Each OBBBA Position

Under ASC 740-10, a tax benefit may only be recognized if it is more likely than not, meaning greater than 50% probability, that the position will be sustained upon examination based on its technical merits.

For well-settled positions, that analysis is straightforward. For novel OBBBA provisions where the IRS has not yet issued final guidance, the "technical merits" analysis must rely on:

1. The statutory text of the OBBBA (Public Law 119-21)
2. The legislative history and conference report
3. Analogous authorities, including prior IRS rulings on similar provisions
4. The weight of well-reasoned legal analysis

The absence of IRS guidance does not automatically mean a position fails the more-likely-than-not threshold. It does mean the documentation burden is higher and the auditor scrutiny will be heavier. Build the technical analysis file before year-end, not during the audit.

What "more likely than not" means in practice for OBBBA positions

For each OBBBA provision you are claiming a benefit on, document:

• The specific statutory language and effective date
• The legal theory supporting your interpretation
• Any analogous IRS guidance, revenue rulings, or case law
• The range of possible outcomes and why your position exceeds 50%
• Who reviewed and approved the position (tax director, external counsel, or Big-4 advisor)

If you cannot reach more likely than not on a position, you record an unrecognized tax benefit (UTB) reserve. That reserve then triggers Schedule UTP disclosure for corporations with $10 million or more in total assets.

Step 2: Recognize and Measure the Four High-Risk OBBBA UTPs

The 1% Charitable Contribution Floor (Section 170)

The OBBBA established a new 1% floor on corporate charitable contribution deductibility for tax years beginning after December 31, 2025. Contributions below 1% of taxable income are permanently disallowed in full. Contributions between 1% and 10% of taxable income have the sub-1% portion permanently disallowed.

If contributions exceed 10% of taxable income, the disallowed amounts, including the sub-1% floor amount, can be carried forward for five years. The existing 10% cap is retained.

The UTP risk here is not the floor itself, which is clear statutory text, but the measurement problem: taxable income is itself uncertain at the time you are computing the floor. A company whose charitable contributions sit close to the 1% threshold faces a compounding uncertainty. If taxable income comes in lower than projected, contributions that appeared deductible may fall below the floor and become permanently disallowed.

For the ASC 740-10 provision:

• Treat the sub-1% floor disallowance as a permanent difference (no deferred tax asset arises)
• If the company's contribution level is near the 1% threshold, model a range of taxable income outcomes and assess the probability distribution
• The measurement step under ASC 740-10 uses the largest amount of benefit greater than 50% likely of being realized upon ultimate settlement
• Document the taxable income estimate and sensitivity analysis in the position file

Section 162(m) Controlled Group Aggregation

The OBBBA expanded Section 162(m) by applying controlled group rules to the $1 million executive compensation deduction limitation. Compensation paid to a covered officer by any controlled group member must be aggregated, with the limitation then allocated pro-rata based on each member's share of compensation paid.

This is the most technically complex OBBBA UTP for 2026. RSM US notes that "these changes may be particularly relevant to public entities with partnerships in their structure, including Up-C structures."

The UTP arises because:

• The allocation methodology across controlled group members is not yet defined by final IRS guidance
• For Up-C structures, it is unclear how partnership-level compensation flows through the controlled group analysis
• The definition of "controlled group" for this purpose (referencing Section 414 rather than the prior Section 1504 affiliated group standard) is broader than many companies previously applied

For the ASC 740-10 provision:

• Amounts expected to be limited under Section 162(m) do not meet the definition of a temporary difference under ASC 740, per RSM US. Do not record a DTA for compensation that will be permanently disallowed.
• For amounts where the allocation methodology is uncertain, record a UTB reserve for the portion you cannot sustain at more likely than not
• Measure the UTB using the cumulative probability method: identify the largest amount of deduction that is more than 50% likely to be sustained
• For Up-C structures, engage external counsel to document the legal theory before year-end

For deeper detail on the Section 162(m) controlled group mechanics and Q2 provision treatment, see Section 162(m): Q2 2026 Tax Provision Updates.

The 2027 ARPA Expansion and 2026 DTA Analysis

The American Rescue Plan Act of 2021 expands the definition of "covered employee" under Section 162(m) to include the next five highest-paid employees, effective 2027. The OBBBA's controlled group rules apply to these additional employees as well.

The 2026 provision implication: companies must evaluate current-year compensation expense to determine which amounts would generate a DTA as of December 31, 2026 but are expected to be limited under Section 162(m) in 2027 or later. Those amounts do not qualify as temporary differences under ASC 740 and must be excluded from the DTA schedule.

This is a forward-looking UTP assessment that requires you to model 2027 compensation levels and the controlled group allocation before closing the 2026 books.

Bonus Depreciation, Section 179, and CAMT Interaction

The OBBBA made permanent 100% bonus depreciation for qualified property acquired after January 19, 2025, and raised the Section 179 expensing cap from $1,000,000 to $2,500,000 for property placed in service in tax years beginning after December 31, 2024, per the IRS Working Families Tax Cuts resource page.

For most companies, these are straightforward temporary differences. The UTP arises at the intersection with the Corporate Alternative Minimum Tax (CAMT). CAMT is computed on adjusted financial statement income (AFSI), which does not follow the same depreciation schedule as the regular tax return. A company claiming 100% bonus depreciation on a large capital expenditure will have a significant regular-tax deduction in year one, but AFSI will reflect the book depreciation schedule instead.

The UTP questions for capital-intensive companies:

• Is the company subject to CAMT in 2026? The 15% CAMT applies to corporations with average annual AFSI exceeding $1 billion. CAMT guidance continues to evolve.
• How does the AFSI adjustment for accelerated depreciation interact with other AFSI items under the current CAMT notices?
• If CAMT applies, does the company have sufficient CAMT credits to offset future regular tax liability, and is a DTA for those credits supportable?

For the ASC 740-10 provision, record the regular-tax temporary difference for bonus depreciation in the normal course. Then separately analyze CAMT applicability and, if applicable, the CAMT credit DTA. Where CAMT guidance is still pending on specific AFSI adjustments, apply the more-likely-than-not threshold to the position and document accordingly. See also ASC 740 Valuation Allowance: Seven Audit Red Flags for Q3 2026 for the related DTA realizability analysis.

The Section 274(o) Restaurant and Fish Processing Exception

The OBBBA added an exception to Section 274(o) for restaurants and fish processing facilities providing meals to employees, carving them out from the TCJA's 100% disallowance of employer-operated eating facility deductions. This exception is effective for amounts paid or incurred after December 31, 2025.

The UTP is narrow but real: the IRS has not yet defined what constitutes a "restaurant" or "fish processing facility" for this purpose. A food service company, hospitality group, or seafood processor claiming this exception is taking a position on undefined statutory terms. Apply the more-likely-than-not threshold based on the plain meaning of the statutory language and any analogous definitions in the Code or regulations. If the company's facts are at the edge of the definition, a UTB reserve is appropriate.

Step 3: Determine Schedule UTP Disclosure Obligations

Corporations with total assets of $10 million or more that have issued audited financial statements must disclose uncertain tax positions on Schedule UTP when filing Form 1120. A position must be reported if the corporation has recorded a reserve under ASC 740-10 or if no reserve was recorded because the company expects to litigate the position. The $10 million threshold has been in place since 2014 tax years and was not changed by the OBBBA, per the final Schedule UTP regulations (T.D. 9510).

For OBBBA-related UTPs where you have recorded a reserve, Schedule UTP disclosure requires:

1. The primary IRC sections relating to the position (e.g., Section 162(m) for the controlled group aggregation UTP, Section 170 for the charitable contribution floor UTP, Section 168(k) for the bonus depreciation/CAMT UTP)
2. A ranking of UTPs by size (largest to smallest, by the amount of the reserve)
3. A description of the relevant facts affecting the tax treatment, written at a level of specificity sufficient for the IRS to understand the nature of the position

For novel OBBBA positions, the "relevant facts" description should explain the specific statutory provision, the interpretation the company is taking, and the nature of the uncertainty (pending guidance, novel statutory language, or interaction effects). Do not describe the position so broadly that it obscures the actual issue.

Practical Schedule UTP sequencing for 2026

1. Complete the ASC 740-10 recognition and measurement analysis for each OBBBA provision
2. Identify all positions where a UTB reserve has been recorded
3. Rank those positions by reserve amount
4. Draft the Schedule UTP fact descriptions for each OBBBA position, citing the specific amended IRC section
5. Integrate OBBBA UTPs with pre-existing UTPs in the overall Schedule UTP ranking
6. Confirm that the Schedule UTP descriptions are consistent with the financial statement footnote disclosures

Step 4: Update the Financial Statement Footnote Under ASU 2023-09

Public companies preparing 2026 annual reports face an additional layer: ASU 2023-09 (Income Taxes: Improvements to Income Tax Disclosures) is effective for annual periods beginning after December 15, 2024, meaning it applies to calendar-year 2026 10-Ks. ASU 2023-09 significantly expands the rate reconciliation and income tax paid disclosures.

For OBBBA UTPs, this means:

• Rate reconciliation: OBBBA permanent differences (the 1% charitable contribution floor disallowance, the 162(m) limitation) must be separately disclosed in the rate reconciliation if they meet the quantitative threshold. The OBBBA's novelty makes these line items likely to draw auditor and investor attention.
• Unrecognized tax benefits rollforward: OBBBA-related UTB additions in 2026 will appear as current-year increases in the UTB rollforward table. Describe the nature of the OBBBA positions in the accompanying narrative.
• Uncertain tax position narrative: Disclose the nature of the OBBBA positions, the range of possible outcomes, and whether it is reasonably possible that the total amount of unrecognized tax benefits will significantly change within 12 months.

The interaction between ASU 2023-09's expanded disclosure requirements and OBBBA's novel UTPs means the income tax footnote in the 2026 10-K will require more granular narrative than in prior years. Draft that narrative early and align it with the Schedule UTP descriptions.

Step 5: Address Compounding Exposures for Multinationals

For multinational groups, OBBBA UTPs do not exist in isolation. RSM US's Q1 2026 analysis flags that international developments across Canada, France, Germany, India, Italy, Spain, and the UK add further compliance considerations, all of which may interact with OBBBA provisions in the annual effective tax rate (AETR) calculation.

The two primary compounding exposures:

• NCTI (formerly GILTI) restructuring: The OBBBA renamed and restructured GILTI as Net CFC Tested Income (NCTI) with changes to the applicable rates and deductions. NCTI UTPs may interact with Pillar Two top-up tax calculations, creating positions where the resolution of a U.S. federal UTP changes the Pillar Two exposure in a foreign jurisdiction. For the full NCTI disclosure framework, see GILTI Is Now NCTI: What to Disclose in Your Q2 2026 Form 10-Q.
• Pillar Two interaction: Pillar Two UTPs and OBBBA UTPs may both affect the AETR. Model them together, not in separate silos. A favorable resolution of an OBBBA UTP that increases U.S. taxable income may simultaneously reduce a Pillar Two top-up tax exposure in a jurisdiction where the effective tax rate was borderline.

Step 6: Brief the Audit Committee and Manage Auditor Scrutiny

Auditors are scrutinizing OBBBA-related tax positions heavily in 2026, given the volume of pending guidance and the novelty of the statutory provisions. Prepare the audit committee before the external auditors raise the issue.

The briefing should cover:

• Which OBBBA provisions the company has taken a tax benefit on
• Which of those positions carry recognition uncertainty (UTB reserves recorded)
• The aggregate UTB reserve attributable to OBBBA positions
• The documentation supporting the more-likely-than-not conclusion for each position
• Whether any OBBBA positions are candidates for private letter ruling requests
• The Schedule UTP and footnote disclosure approach

If a material OBBBA UTP exists, assess whether it rises to the level of a Critical Audit Matter (CAM) in the auditor's report. A CAM determination requires the auditor to describe the principal considerations that led to the conclusion and how the matter was addressed in the audit. Tax directors should anticipate this conversation and have the position documentation ready.

FAQ

Does the OBBBA change the Schedule UTP asset threshold?No. The $10 million total asset threshold for Schedule UTP reporting has been in place since 2014 tax years and was not modified by the OBBBA. Corporations filing Form 1120, 1120-L, 1120-PC, or 1120-F with audited financial statements and $10 million or more in total assets remain subject to Schedule UTP disclosure.

Can a company take the full Section 162(m) deduction benefit while IRS guidance is pending?Only if the company can document a more-likely-than-not conclusion based on the statutory text, legislative history, and analogous authorities. For Up-C structures and other complex arrangements, reaching that threshold without external counsel support is difficult. Where the position cannot be sustained at more likely than not, a UTB reserve is required.

Is the 1% charitable contribution floor a permanent difference or a temporary difference?The sub-1% floor disallowance is a permanent difference. No DTA arises for the disallowed amount. Amounts above 10% of taxable income that are disallowed and carried forward are temporary differences, because they may be deductible in a future year.

Do OBBBA UTPs need to be reflected in interim provision calculations?Yes. The AETR for interim periods must incorporate OBBBA permanent differences and any UTB reserves. Errors in classifying OBBBA changes as permanent versus temporary differences, or in identifying which provisions generate UTBs, will flow through the AETR and require correction in subsequent quarters.

What if the IRS issues guidance after year-end but before the 10-K is filed?Subsequent events guidance under ASC 740-10 applies. If the IRS issues guidance after December 31, 2026 but before the financial statements are issued, evaluate whether the guidance is a recognized subsequent event (clarifying conditions that existed at year-end) or a non-recognized subsequent event (new information). Guidance that clarifies the meaning of a 2026 statutory provision will generally be treated as a recognized subsequent event and may require adjustment to the UTB reserve.

Should we seek a private letter ruling on novel OBBBA positions?For material positions where the more-likely-than-not threshold is genuinely uncertain and the dollar exposure is significant, a private letter ruling or technical advice request is worth evaluating. The process takes time, so initiate it well before year-end if you are considering this route. A ruling request does not suspend the obligation to record a UTB reserve in the interim.

The 2026 annual provision is the first full-year test of how the OBBBA interacts with the UTP framework. Get the position documentation right now, before auditors ask for it.