04-08-2025
Cash Windfall From Trump's Tax Law Is Starting to Show Up at Big Companies
Provisions in President Trump's 'One Big Beautiful Bill Act' will give windfalls to companies. The magnitude of the cash savings from this summer's federal tax legislation is starting to take shape at America's biggest companies.
AT&T recently said it expected $1.5 billion to $2 billion in cash tax savings this year, due to provisions in the tax-and-spending law dubbed the Bill Act">One Big Beautiful Bill Act. The high end of the range is equivalent to an 11% boost to analyst estimates of 2025 free cash flow before the law was enacted. AT&T estimated annual cash tax savings of $2.5 billion to $3 billion in both 2026 and 2027.
In short, changes like allowing upfront depreciation of assets and immediate expensing of research-and-development expenses will bring swift windfalls to American corporations but also lasting tailwinds. This in turn has provided incremental fuel to stock markets, a counterweight to risks from tariffs and other policy uncertainty.
The cash savings won't affect reported earnings, which are calculated using different accounting rules than taxes. It won't all ultimately end up in free cash flow either, because AT&T plans to reinvest much of the savings in new capital projects. But the change is still a positive for the company's shareholders and valuation, all other things being equal.
'More cash in the company's pocket. Less cash in Uncle Sam's pocket. That in theory should be good for investors,' said David Zion, founder of Zion Research Group and a longtime accounting and tax analyst.
AT&T raised its 2026 and 2027 estimates for free cash flow by $1 billion each year to $18 billion and $19 billion, respectively. That means more available cash to pay for things like debt reduction or buying back stock. Free cash flow typically is defined as cash flow from operating activities minus capital expenditures.
AT&T's numbers are small potatoes compared with the biggest tech giants' expected windfalls. Zion in a recent report estimated that Meta Platforms' cash tax savings could be as much as $11 billion this year. That is equivalent to 31% of previously estimated free cash flow for the year.
Similarly, Zion estimates cash tax savings this year could be $15.7 billion, equivalent to 43% of the average analyst estimate for 2025 free cash flow. Other companies with estimated one-year savings equivalent to 30% of free cash flow or more include Charter Communications, Targa Resources and Texas Instruments.
All told, Zion estimates $148 billion in cash tax savings for a sample that covered 369 of the companies in the S&P 500. That is equivalent to 8.5% of the companies' combined full-year estimates for free cash flow as of June 30, right before Congress passed the tax law, using estimates compiled by S&P Global Market Intelligence.
Amazon, Meta, Alphabet and Microsoft together accounted for 38% of the total. Most companies, including those four, haven't disclosed estimates yet quantifying the impact. Zion used 2025 estimates for companies with calendar fiscal years and 2026 estimates for companies with non-calendar fiscal years.
The firm's $148 billion estimate covers three major tax changes with the biggest potential impact on free cash flow. For starters, the new tax law brings back so-called 100% bonus depreciation. This means businesses can fully and immediately expense most depreciable assets in the U.S. for tax purposes, if they acquired and placed the assets into service after Jan. 19.
The government also reinstated upfront expensing for U.S. research and development. That includes letting companies accelerate the expensing of previously unamortized R&D costs, which mainly is a one-time benefit rather than a sustainable source of cash. At Meta, for instance, Zion estimates $4.6 billion of the $11 billion in savings would come from accelerating expensing of unamortized R&D already on the books, while $3.6 billion would be from upfront expensing of new R&D, and $2.8 billion would be from full expensing of business property.
Zion used rough, back-of-the-envelope math for his estimates. The savings could be lower, depending, in part, on the tax choices that companies make. For instance, some companies could elect not to fully accelerate expensing of unamortized R&D this year.
Another provision in the new tax law relaxed the limit on deductibility of interest expense. The Congressional Budget Office estimated the new law's provisions on deductibility for capital expenditures, R&D and interest expense would cost the government $363 billion, $141 billion and $61 billion, respectively, over 10 years.
So while some provisions provide only a near-term boost, others will keep paying off for companies for years to come. Whatever one's views about corporate tax breaks and ballooning budget deficits, they likely have helped bolster stock valuations.
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