In a clear nod to domestic manufacturing and infrastructure investment, the One Big Beautiful Bill Act (OBBBA) delivers a permanent 100% bonus depreciation benefit for certain long-term industrial assets. This provision, focused on Qualified Production Property, is designed to incentivize capital investment in U.S.-based manufacturing and refining facilities, offering tax savings that could reshape how and where businesses expand.
If your business operates in the construction, industrial development, or manufacturing sector, these changes could significantly reduce your tax burden while accelerating equipment and facility upgrades.
What Counts as Qualified Production Property?
Under OBBBA, Qualified Production Property refers to new or used manufacturing or refining facilities that would otherwise be depreciated over 39 years under the Internal Revenue Code. Now, those facilities are eligible for 100% first-year bonus depreciation, provided the property is placed in service after January 19, 2025.
This means a business that builds or acquires a qualifying facility can deduct the full cost in the year the facility is operational, rather than recovering it slowly over nearly four decades.
Notably, the law requires that depreciation be allocated proportionally between the functional and administrative portions of the facility. In other words, only the portion of the property used directly in the production or refining process qualifies for the full bonus.
Who Benefits?
The most direct beneficiaries of this change are companies that:
- Build or buy production plants or refineries
- Expand existing manufacturing capacity
- Construct multi-use industrial facilities with clearly separated administrative and production functions
However, the impact extends beyond large manufacturers. Industrial real estate developers and construction firms may see increased demand for built-to-suit production facilities. Equipment suppliers and capital goods manufacturers may also benefit as businesses accelerate timelines for capital investment.
Why This Matters for Ohio Businesses
Ohio’s economic backbone comprises manufacturing, logistics, and agriculture sectors, which are well-positioned to take advantage of this change. For businesses already exploring expansion or modernization, the accelerated depreciation may tip the scales in favor of moving forward. It also pairs effectively with other permanent OBBBA provisions, such as the restoration of 100% bonus depreciation for general business property and the implementation of a flat 2.75% Ohio income tax rate beginning in 2026.
Planning Ahead
This is not just a tax break—it’s a strategic opportunity. Businesses considering major investments in facilities or infrastructure should evaluate how to structure those investments to maximize depreciation while remaining compliant with allocation requirements.
It’s also a reminder to revisit entity structure, cost segregation studies, and overall asset strategy, particularly for clients seeking to manage taxable income more actively over the next several years.
How We Can Help
At Carlile Patchen & Murphy, we work with clients across the industrial and commercial landscape to ensure capital investments are aligned with tax-smart outcomes. From working with your CPA to ensure proper allocation to evaluating whether your expansion plans qualify under the new rules, we’re here to help you leverage the full benefit of Qualified Production Property depreciation.
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