The IRS recently issued interim guidance for business taxpayers seeking to take advantage of a new 100% depreciation deduction for certain manufacturing, production and refining facilities placed in service between July 4, 2025, and Jan. 1, 2031.
The tax code change was authorized by the 2025 “One, Big, Beautiful Bill Act.”
In Notice 2026-16, the IRS said it plans to issue proposed regulations implementing this provision of OBBBA that allows businesses to elect to deduct up to 100% of the unadjusted depreciable basis of qualified production property placed in service during a taxable year. Taxpayers may rely on the guidance in the notice until proposed regulations are issued.
Companies with current or planned domestic manufacturing, production, or refining operations — or those considering onshoring such operations — should review the interim guidance carefully to evaluate whether they might qualify for this significant new incentive.
Under the guidance, qualified production property generally includes nonresidential real estate used as an integral part of a qualified production activity. The law defines qualified production activities as manufacturing, chemical production, agricultural production, or refining activities that substantially transform property into a qualified product.
The special depreciation allowance applies only to property placed in service after July 4, 2025, and before Jan. 1, 2031, and is subject to other requirements outlined in the notice.
Notice 2026-16 provides interim definitions of qualified production property and qualified production activity, explains how to calculate the special depreciation allowance, and details how and when taxpayers may elect to treat property as qualified production property. It also addresses how “depreciation recapture” rules that would apply if business property later fails to meet the eligibility requirements.
The IRS is also seeking public comment on the interim guidance, including areas where additional clarification may be needed. Comments must be submitted by April 20, 2026.
