The U.S. Treasury Department and the Internal Revenue Service have released new interim guidance on a major tax benefit created under the One Big Beautiful Bill. The provision allows eligible businesses to deduct up to 100% of the cost of certain production-related buildings and facilities in the year they are placed in service.
This accelerated depreciation opportunity applies to qualified production property placed in service between July 4, 2025 and December 31, 2030.
What Is Qualified Production Property?
Under the new law, qualified production property generally means nonresidential real estate used directly in a production activity. This includes facilities used as an integral part of:
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Manufacturing
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Chemical production
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Agricultural production
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Refining or processing activities
The key requirement is that the activity must result in a substantial transformation of materials into a finished product. In other words, the facility must be directly involved in producing goods — not simply storing or distributing them.
What the New Deduction Allows
Eligible taxpayers may elect to claim a special depreciation allowance of up to 100% of the property’s unadjusted depreciable basis in the year the property is placed in service.
This effectively allows businesses to:
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Deduct the full cost of qualifying production facilities immediately
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hookup front-loaded tax savings instead of spreading depreciation over decades
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improve cash flow during expansion or construction
This treatment is similar in concept to bonus depreciation, but specifically targeted at production property.
IRS Notice 2026-16: Interim Guidance
Because this is a new provision, the IRS issued Notice 2026-16 to explain how the rules apply until formal regulations are finalized. The notice clarifies:
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Definitions of qualified production property and activities
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How to calculate the 100% depreciation allowance
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How and when to elect this treatment
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How depreciation recapture applies if the property later stops qualifying
Taxpayers may rely on this interim guidance until final regulations are issued.
Key Timing Requirements
To qualify for the deduction:
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The property must be nonresidential real property
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It must be used in a qualified production activity
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It must be placed in service after July 4, 2025
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It must be placed in service before January 1, 2031
Projects completed outside this window do not qualify.
Important Considerations for Businesses
While the potential tax savings are significant, several factors must be evaluated before claiming the deduction:
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Whether the facility meets the definition of production property
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How the election affects long-term depreciation strategy
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Potential depreciation recapture if use changes
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Interaction with other incentives or credits
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State tax treatment differences
Because the rules are new and still evolving, professional review is recommended before making the election.
How Morris & Associates Can Help
At Morris & Associates, we help businesses evaluate new tax incentives and apply them correctly. For companies involved in manufacturing, processing, agriculture, or refining, this new 100% production property depreciation rule could create substantial tax savings.
We assist with:
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Determining property eligibility
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Calculating allowable depreciation
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Making proper elections
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Planning construction and placement timing
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Integrating incentives into long-term tax strategy
📍 Serving businesses across Gwinnett County and the Greater Atlanta area, our team helps you take advantage of new tax laws while staying fully compliant. Schedule your free 15 minute consultation today.
