Qualified Production Property
Final Thoughts
The reinstatement of 100 % bonus depreciation under the OBBBA is a powerful tax incentive, but one that comes with transitional guidelines. Taxpayers must carefully evaluate:
• When the property was acquired( and under what contractual terms).
• When the property is placed in service.
• Whether construction qualifies under the 10 % rule.
• Next steps if rules are not satisfied.
With proactive planning and detailed documentation, taxpayers can explore their eligibility under the new rules and position themselves to fully benefit from this revitalized depreciation incentive
About Our Authors
BOB YATES
MANAGING PRINCIPAL GREATER NASHVILLE REGION, DOEREN MAYHEW ADVISORS, LLC byates @ doeren. com
Bob leverages his 25-year public accounting background to strategically lead the firm’ s greater Nashville region. He also serves in its Real Estate Tax Consulting Group, delivering value-added solutions aimed at helping local businesses, and their owners, meet financial goals.
PAUL ELLIS
PRINCIPAL DOEREN MAYHEW ADVISORS, LLC pellis @ doeren. com
Applying more than 30 years of experience, Paul leads Doeren Mayhew’ s Real Estate Tax Consulting Group and focuses on tax compliance and planning services for closely held businesses.
Qualified Production Property
QPP is a new category of depreciable nonresidential real property introduced under IRC § 168( n) by the OBBBA. It includes buildings and structures used directly in manufacturing, production or refining activities. The provision’ s intent is to incentivize domestic industrial development by providing 100 % bonus depreciation of large capital investments in qualifying facilities.
This stands in contrast to traditional nonresidential real property, which is typically depreciated over 39 years under the MACRS. With the QPP designation and proper timing, eligible buildings may be written off in full in the year they are placed in service.
Key Requirements for QPP Eligibility
To qualify for 100 % bonus depreciation as QPP, the property must meet a specific set of criteria:
1. Property must be used as an integral part of qualified production activity, meaning the structure must directly support core operations, such as manufacturing, processing or refining.
2. The original use of the property must begin with the taxpayer, and the property must be used within the U. S. or its territories.
3. Building must be used primarily for qualified production activities, such as manufacturing or assembly of tangible goods, refining or chemical processing, or fabrication or extraction operations.
4. Construction must begin after Jan. 19, 2025, and
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5. The QPP must be placed in service after July 4, 2025, and before Jan. 1, 2031.
6. Taxpayers must make a formal election under IRC § 168( n) on their return for the year the property is placed in service. Failure to make this election will result in default MACRS treatment.
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