The Internal Revenue Service has released interim guidance for businesses aiming to use a new 100% depreciation deduction for certain manufacturing, production, and refining facilities. This deduction applies to property placed in service between July 4, 2025, and January 1, 2031.
The change comes from the “One, Big, Beautiful Bill Act” passed in 2025. In Notice 2026-16, the IRS announced plans to propose regulations that would allow businesses to deduct up to the full unadjusted depreciable basis of qualified production property within a taxable year. Taxpayers can rely on this notice until formal regulations are issued.
Businesses with current or planned domestic manufacturing, production, or refining operations—or those considering moving such operations to the United States—are encouraged to review the interim guidance closely to determine if they qualify for this incentive.
According to the guidance, 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 activities that substantially transform property into a qualified product.
This special depreciation allowance is available only for property placed in service after July 4, 2025 and before January 1, 2031. Additional requirements are outlined in the notice.
Notice 2026-16 offers interim definitions of both qualified production property and qualified production activity. It also explains how to calculate the special depreciation allowance and details how taxpayers may elect to treat property as qualified production property. The notice addresses how “depreciation recapture” rules would apply if business property later fails to meet eligibility requirements.
The IRS is seeking public comment on this interim guidance and areas where further clarification may be needed. Comments must be submitted by April 20, 2026.
The New Jersey Business and Industry Association (NJBIA), which serves as the nation’s largest statewide employer association representing employers across various sectors according to its official website, provides advocacy and essential information for its members regarding regulatory changes like these. NJBIA also advances competitive excellence among its members while facilitating partnerships among businesses, government entities, and academic institutions (source). Michele Siekerka is president and chief executive officer of NJBIA (source).
