One Big Beautiful Bill Up Close: Bonus Depreciation for U.S. Manufacturing Facilities

The accelerated bonus depreciation provision under the One Big Beautiful Bill Act (OBBBA) can provide meaningful benefits for U.S.-based manufacturers with owner-occupied facilities — offering significant upfront tax savings. However, the provision is time-sensitive and requires careful planning to meet service and acquisition windows.

Below highlights what manufacturers need to know to take advantage of the provision for their facilities.

What is the Accelerated Bonus Depreciation in the OBBBA?

The OBBBA allows for 100% expensing of qualified production property if you as the owner (and occupant) of the building:

• Begin construction, reconstruction or erection after January 19, 2025, and before January 1, 2029; and
• Place your property in service between July 4, 2025, and January 1, 2031.
  • Written binding contract rule determines acquisition date eligibility

Note: leased buildings are excluded.

Qualified production property includes nonresidential real property:

• Used in a qualified production activity,
• Placed in service in the U.S. or its possessions, and
• Originally used for manufacturing, producing or refining a qualified product.

A special acquisition rule allows used property to qualify if it’s acquired within the specified dates and was not previously used in a qualified production activity by you or a related party. The rules are strict, so be sure to adhere to them if trying to use bonus depreciation on used property.

What Is Qualified Production Property (QPP) Under the OBBBA?

To qualify, the property must be:

• Nonresidential real property;
• Used by you, the taxpayer, as an integral part of a qualified production activity (QPA)
• Located in the U.S. or one of its territories;
• Originally used by you, or meet specific exceptions for unused acquired property (outlined below);
• Constructed between January 20, 2025, and December 31, 2028; and
• Placed in service before January 1, 2031.

What is a Qualified Production Activity (QPA) Under the OBBBA?

The term QPA means the manufacturing, production or refining of a qualified product. Your activities must result in a substantial transformation of the property to qualify.

Who Can Benefit the Most from Accelerated Bonus Deprecation Under the OBBBA?

Certain types of manufacturers will get the most out of this provision, particularly in the manufacturing, industrial processing, chemical production, energy and advanced materials sectors:

• U.S.-based manufacturers planning to build or acquire production facilities.
• Companies investing in new or repurposed real property for manufacturing, refining or production activities.
• Businesses seeking to accelerate depreciation for tax planning and cash flow optimization.

Take Advantage of This Planning Opportunities for Your Manufacturing Facility

If you are a U.S.-based manufacturer, the accelerated bonus depreciation provision under the OBBBA presents a valuable opportunity to optimize your tax planning and cash flow.

Below are some best practices to maximize the benefits of this provision, in conjunction with your tax advisers:

• Assess Eligibility. Review current and planned projects to determine if they meet the criteria for qualified production property.
• Strategize Timing. Plan construction or acquisition activities to align with the eligible windows for service and acquisition.
• Ensure Ownership. Confirm properties are owned rather than leased to qualify for the 100% expensing benefit.
• Maintain Documentation. Keep detailed records of acquisition dates, usage and compliance with the provision's requirements.

Visit our OBBBA Resource Center for the latest updates.

Contact Jeffrey McMichael or a member of your service team to discuss these topics further.

In this blog Cohen & Co is not rendering legal, accounting, investment, tax or other professional advice. Rather, the information contained in this blog is for general informational purposes only. Any decisions or actions based on the general information contained in this blog should be made or taken only after a detailed review of the specific facts, circumstances and current law with your professional advisers.