Qualified Production Property

A part of the One Big Beautiful Bill Act allows for Qualified Production Property (QPP) to be 100% written off in the year the property is placed in service rather than having to spread the cost out over the traditional 39 years used for nonresidential real property. This creates a significant opportunity for manufacturers, agricultural producers, and chemical processors. Recently released guidelines outline which facilities and improvements qualify.

QPP is a new class of nonresidential real property that is integral to a taxpayer’s domestic production activities. To be eligible for the 100% bonus depreciation allowance, the property must meet a series of requirements.

1. Original use beginning with the taxpayer as an integral part of a ‘qualified production activity’ (QPA).

2. Placed in service in the United States or a U.S. territory after July 4, 2025, and before Jan. 1, 2031.

3. Construction beginning after Jan. 19, 2025, and before Jan. 1, 2029.

So what qualifies as a Qualified Production Activity (QPA):

1. Manufacturing, production, or refining of a qualified product that results in a substantial transformation-process that fundamentally changes the form or function of raw materials or components creating a new and distinct item of tangible personal property. A QPA can also include ‘essential’ activities that are critical to the completion of the product if they occur in the same property as the qualified production activity.

2. Activities specifically excluded are office and administrative services, sales, research and development, lodging and parking. Critically, the storage of finished goods is not considered an essential activity and space used for this purpose is ineligible.

   
   

If you have property that may qualify or construction plans in the works for which this may apply, please reach out to us and we can assist you with determining the tax benefits and timing.

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