The Internal Revenue Service (IRS) has released interim guidance for business taxpayers regarding a new 100% depreciation deduction available for certain manufacturing, production, and refining facilities. This incentive applies to property placed in service between July 4, 2025, and January 1, 2031.
This tax code change was established by the “One, Big, Beautiful Bill Act” of 2025. According to Notice 2026-16, the IRS plans to issue proposed regulations that will implement this provision. The notice allows businesses to elect to deduct up to the full unadjusted depreciable basis of qualified production property put into service during a taxable year. Until proposed regulations are published, taxpayers can rely on the guidance provided in this notice.
Businesses with current or planned domestic operations in manufacturing, production, or refining—or those considering bringing such operations back to the United States—are advised to review the interim guidance closely to determine if they qualify for this new incentive.
Under the interim rules, qualified production property generally includes nonresidential real estate used as an integral part of a qualified production activity. The law defines these activities as manufacturing, chemical production, agricultural production, or refining processes that substantially transform property into a qualified product.
The special depreciation allowance is limited to property placed in service after July 4, 2025 and before January 1, 2031. Additional requirements are outlined in the notice.
Notice 2026-16 provides temporary definitions for both qualified production property and activity. It also explains how to calculate the special depreciation allowance and details how and when taxpayers may elect to treat property as qualified under these rules. The notice further addresses “depreciation recapture” provisions if business property later fails to meet eligibility requirements.
The IRS is seeking public comments on this interim guidance and requests feedback on areas where further clarification might be needed. Comments must be submitted by April 20, 2026.
