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By Sam Stevenson
Associate News Editor
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The Internal Revenue Service (IRS) has released new guidance explaining how businesses can claim an up to 100 percent depreciation write‑off for certain production facilities under a recently enacted tax law.
Why It Matters
It is one of the tax breaks created by the One Big Beautiful Bill (OBBB) to encourage new manufacturing and production investment, but key details were previously unclear.
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The IRS guidance fills that gap, giving companies rules they can rely on now.
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What To Know
The Treasury Department and IRS issued interim guidance on a special depreciation allowance for “qualified production property,” a new benefit added to the tax code by the OBBB.
The guidance, set out in Notice 2026-16, offers definitions, timelines, and election mechanics for a special depreciation allowance created by the OBBB.
It allows taxpayers to immediately deduct up to 100 percent of the unadjusted depreciable basis of eligible property in the year it is placed in service.
Qualified production property is generally defined as nonresidential real estate—such as factory buildings—used as an integral part of a qualified production activity.
Those activities include manufacturing, chemical production, agricultural production, and refining that result in a substantial transformation of a product.
The guidance makes clear that the allowance only applies to property placed in service after July 4, 2025, and before January 1, 2031, and that taxpayers must affirmatively elect to treat property as qualified production property.
It also outlines how to calculate the deduction, how related‑party and mixed‑use properties are treated, and when depreciation may have to be recaptured if the property later stops qualifying.
Treasury and the IRS said taxpayers may rely on this interim guidance immediately, even before formal regulations are finalized.
The agencies also announced they plan to issue proposed regulations to further flesh out the rules.
What People Are Saying
The IRS said: “Notice 2026-16 announces that Treasury and the IRS will issue proposed regulations on a new provision of the law allowing taxpayers to elect to take a depreciation deduction up to 100 percent of the unadjusted depreciable basis of any qualified production property placed in service during a taxable year.
“Qualified production property is, generally, nonresidential real property used by a taxpayer as an integral part of a qualified production activity.
"A qualified production activity is a manufacturing, chemical production, agricultural production, or refining activity that results in the substantial transformation of the property comprising a qualified product.
“In addition to other requirements, the special depreciation allowance only applies to qualified production property placed in service after July 4, 2025, and before Jan. 1, 2031.”
What Happens Next
Treasury and the IRS are seeking public comment on the guidance as they prepare proposed regulations, a process that will shape how broadly the new production incentive is ultimately used.
Stakeholders will have 60 days from the notice’s issuance to submit comments.
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