TECHnalysis Research president Bob O'Donnell writes a regular column in Forbes and those columns are posted here and archived on this site.
November 5, 2025
By Bob O'Donnell
When it comes to deciphering the tax details of corporate earnings, let’s be honest, it’s not exactly a fun or easy job. There is a reason that financial executives earn the kind of money they do.
But it turns out knowing a bit about how the basic elements of these taxes work can make a big difference when it comes to understanding the financial performance of a given company. This is particularly true now in the world of tech and other companies with big R&D budgets. The reason? There were a lot of little-known changes impacting corporate taxes in the One Big Beautiful Bill (OBBB) recently passed by the US Congress and some of those changes are now starting to be discussed by big tech companies.
Just last week Meta disclosed a large tax writedown during their earnings call as a result of these OBBB changes and today Qualcomm is doing something similar. (And there are likely to be other examples later this quarter and into the next one.) In both instances, these actions have to do with changes from OBBB that impact how companies categorize certain R&D-related assets to improve their tax bill.
The specific details are very complex but the overall principles are relatively straightforward. As part of OBBB, the US government created new ways to incent companies to spend more on R&D and receive the benefits of those investments sooner than they used to. Before the bill, many companies like Qualcomm were required to capitalize their R&D spend, creating what are called Deferred Tax Assets (DTA). Companies used these DTAs to essentially give themselves an “on-paper” credit for R&D investments made in one year that they would then be able to deduct over a several year period. Financially, this was the way to get credit and tax benefits for those investments.
With OBBB, however, the incentive structure has changed by allowing R&D investments to be taken in the same year they were spent. This, in turn, allows companies to essentially reduce their income levels and qualify for lower tax rates moving forward. In the long run, this means companies can have more predictable, lower tax payments and allows (and encourages) them to make more investments in areas like R&D.
For companies who had been building up DTAs prior to the passage of OBBB, however, it also required them to rethink what they were going to do with those on-paper credits. In the case of both Qualcomm and Meta, the decision was made to write them off so that they could take full advantage of the lower tax rates that became available to them. The net result was a drop in the GAAP earnings (the required, standardized accounting rule-based ones) to reflect that writeoff. However, to be clear, this was only a one-time accounting write-off, not a tax payment or loss of any kind. As a result, in the case of Qualcomm, their non-GAAP earnings for the quarter (which don’t include these paper assets or losses) shows a big positive difference ($5.7 billion) vs. their GAAP earnings. In Meta’s case, they only report GAAP earnings, so the difference didn’t show up.
While some might initially be concerned with what looks like an important financial hit, it’s important to emphasize that these kinds of writeoffs are not a reflection of income, business performance or any other meaningful statistic about how the companies are doing. They are simply an accounting detail and set the company up for a much better (and frankly, more transparent) tax structure moving forward. In fact, in Qualcomm’s case, if they hadn’t taken this charge, they would have ended up in a higher effective tax rate for the long term.
While I have to admit, I’d never thought I’d care too much about the details of corporate tax structure, the exercise of figuring this all out has certainly proven that diving into the details of something can really make a big difference in understanding context and relevance.
Disclosure: TECHnalysis Research is a tech industry market research and consulting firm and, like all companies in that field, works with many technology vendors as clients, some of whom may be listed in this article.
Here’s a link to the original column: https://www.forbes.com/sites/bobodonnell/2025/11/05/the-hidden-story-behind-techs-big-tax-writeoffs/
Forbes columnist Bob O'Donnell is the president and chief analyst of TECHnalysis Research, a market research and consulting firm that provides strategic consulting and market research services to the technology industry and professional financial community. |
