The One Big Beautiful Bill Act introduced a powerful new tax benefit for the manufacturing and production industries. Under Internal Revenue Code Section 168(n), businesses can immediately expense 100% of the cost of Qualified Production Property (QPP)—even when it's real property that would normally depreciate over decades.
To qualify as QPP, the property must be:
- nonresidential real property
- used as an integral part of a qualified production activity—i.e., facilities directly involved in manufacturing, production, refining, agricultural, or chemical production
- QPP does not include the portion of the property used for offices, admin services, parking, sales, research, software development, or engineering.
- property whose original use begins with the taxpayer,
- constructed between January 20, 2025 and December 31, 2028, and placed in service by December 31, 2030
- the taxpayer elects to treat it as QPP
Used property can also qualify if (i) it is acquired between January 20, 2025 and December 31, 2028, (ii) has never been used in production by anyone between Jan 1, 2021 and May 12, 2025, (iii) it is has not been used by the taxpayer before acquisition and (iv) it is acquired from an unrelated party.
Note that the entire benefit will be recaptured if the property ceases to be used in a qualified production activity within 10 years after being placed in service.
Bottom Line: There is now a huge tax incentive for newly constructed or acquired manufacturing and production facilities provided they are operated as such for 10 years. Taxpayers may wish to conduct a cost-segregation study to ensure ineligible space (offices, admin services, parking) is not included in the election.
"It's so simple to be wise. Just think of something stupid to say and then don't say it. – Sam Levinson
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