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The 2026 midterm elections have put Democrats on course to control both the House and Senate, setting the stage for divided government in 2027. For CPAs and businesses, this shift could influence future legislation affecting business tax credits, energy tax incentives, and investment deductions. Current tax laws remain in effect, making it important to evaluate existing opportunities while monitoring potential changes to federal tax policy.
KBKG Insight
The new congressional landscape could renew attention to business tax incentives supporting energy efficiency, domestic manufacturing, and capital investment. Divided government may complicate comprehensive tax reform, increasing the importance of targeted bipartisan legislation. For CPAs and businesses, the key tax planning priority heading into 2027 is identifying which incentives remain available, which face statutory deadlines, and which could change through legislation. Businesses that evaluate qualifying activities and investments now will be better positioned to claim existing tax benefits and adapt to legislative developments.
Background: What Business Tax Incentives Could Be Affected in 2027?
Will the 179D Energy Tax Incentive Be Extended?
The 179D tax incentive for energy-efficient commercial buildings could return to the legislative agenda in 2027.
Under current law, the 179D deduction is unavailable for property whose construction begins after June 30, 2026. Projects that began construction on or before that date may still qualify when placed in service in later years, provided all eligibility requirements are met.
Any extension would require new legislation. Businesses should review project timelines and documentation to identify remaining opportunities.
For a full breakdown on the significance of the 179D tax incentive in 2027, please see KBKG’s previous article, 179D After the Sunset: Why Designers Can Continue Claiming the Deduction for Years.
What Happens to R&D Tax Credits and Research Expensing in 2027?
The 2025 tax law generally restored immediate deductions for qualifying domestic research expenditures under Section 174A for tax years beginning after December 31, 2024, subject to applicable rules and elections.
Businesses should continue evaluating R&D tax credit eligibility, documenting qualified research expenses, and reviewing transition rules for previously capitalized research costs.
Existing R&D tax credit and domestic research expensing provisions remain in effect, regardless of future legislative discussions.
Is 100% Bonus Depreciation Still Available in 2027?
Yes. The 2025 tax legislation permanently restored 100% bonus depreciation for qualifying property acquired after January 19, 2025, subject to applicable requirements and elections.
A cost segregation study identifies building components eligible for shorter depreciation recovery periods, accelerating deductions and improving cash flow, which can fund reserves, renovations, or new investments.
Businesses should evaluate acquisition dates, placed-in-service dates, and asset classifications to determine eligibility.
For more information, read KBKG’s previous article, 100% Bonus Depreciation Now Permanent Under Tax Bill.
How Could Divided Government Affect Business Tax Legislation?
Divided government could influence negotiations over federal business tax incentives, energy policy, and investment-related tax provisions.
Targeted bipartisan measures may receive greater consideration than broad tax reform. However, the timing and likelihood of any legislative changes remain uncertain.
Businesses should monitor enacted legislation and IRS guidance before adjusting tax strategies.
Conclusion: Tax Planning Priorities for 2027
The 2026 midterm elections create a new legislative environment for business tax planning. While Congress may revisit certain incentives, existing provisions for R&D tax credits, cost segregation, 100% bonus depreciation, and qualifying 179D projects remain governed by current law.
CPAs and businesses should review available incentives, maintain supporting documentation, and monitor legislative developments to maximize existing tax planning opportunities.
Action Steps
KBKG’s tax specialists can work with CPAs and businesses to evaluate tax credit eligibility, identify potential tax savings, and assess how future legislation could affect their tax planning strategies.
Contact KBKG to discuss business tax incentives and planning opportunities for 2027.
IRS and Legislative References
Editorial note: Prepared based on information available November 4, 2026. Individual election results, legislative proposals, and agency guidance may change.
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Frequently Asked Questions
What should businesses look for in a tax credit and incentive provider?
Businesses should choose a tax credit and incentive provider with specialized expertise in R&D tax credits, cost segregation, and energy tax incentives. Key considerations include access to experienced tax professionals and engineers, thorough documentation and audit support, and the ability to identify multiple tax-saving opportunities while coordinating with existing CPA advisors. KBKG’s tax credit and incentive services offer this multidisciplinary approach to business tax planning.
Can businesses carry forward unused R&D tax credits into 2027 and beyond?
Yes. Businesses that cannot fully utilize their R&D tax credits due to tax liability limitations can generally carry unused federal research credits forward for up to 20 years. Reviewing R&D tax credit carryforwards can uncover opportunities to reduce future federal income tax liabilities, subject to applicable limitations.
When should a business consider a cost segregation study?
Businesses should consider a cost segregation study when purchasing, constructing, or renovating commercial or investment real estate. A study identifies building components that may qualify for shorter depreciation periods, potentially accelerating tax deductions. Properties acquired in prior years may also qualify for a look-back cost segregation study, which can provide opportunities to claim previously missed depreciation deductions through applicable accounting method change procedures.