Manufacturers and other producers could soon write off the full cost of certain new facilities in the same year they place them in service.
The U.S. Department of the Treasury and the Internal Revenue Service released interim guidance on a special depreciation allowance for qualified production property under the One, Big, Beautiful Bill.
Notice 2026-16 announces that Treasury and the IRS plan to issue proposed regulations for a new provision in the law. The provision allows taxpayers to elect to take a depreciation deduction of up to 100% of the unadjusted depreciable basis of qualified production property placed in service during a taxable year.
What counts as qualified property?
The law generally defines qualified production property as nonresidential real property that a taxpayer uses as an integral part of a qualified production activity.
A qualified production activity includes manufacturing, chemical production, agricultural production or refining. The activity must result in the substantial transformation of the property that makes up a qualified product.
The special depreciation allowance applies only to qualified production property placed in service after July 4, 2025, and before Jan. 1, 2031.
What the interim guidance covers
The notice explains how Treasury and the IRS define qualified production property and qualified production activity.
It also outlines how taxpayers determine the special depreciation allowance and how and when they can elect to treat property as qualified production property.
The guidance addresses how depreciation recapture rules apply if property later stops meeting the requirements to qualify.
Taxpayers can rely on the rules in Notice 2026-16 until Treasury and the IRS issue proposed regulations.
Treasury and the IRS request comments on the interim guidance, including specific areas where additional direction may help. Officials said taxpayers should submit comments within 60 days of the notice’s issuance.
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