Qualified Production Property (QPP) – A compelling bonus depreciation opportunity. 

The One Big Beautiful Bill Act (OBBBA) has introduced IRC § 168(n), establishing a new category of property called Qualified Production Property (QPP), eligible for 100% Bonus Depreciation.

Qualified Production Property (QPP) is considered as any non-residential real property that is integral to a qualified production activity.  This includes facilities used for manufacturing, production, or refining tangible personal property within the United States. 

For businesses investing in U.S. manufacturing, production, or refining, this is more than just a tax break — it’s a strategic advantage.

Section 168(n) – Qualified Production Property (QPP) 

Section 168(n) is a new incentive that allows qualifying manufacturers to take 100% bonus depreciation on certain real property used in manufacturing, production, refining, or agricultural activities. This means eligible buildings and infrastructure can be fully written off in the first year, instead of depreciating over decades. 

Who Qualifies 

To qualify, the property must: 
– Be nonresidential real property used as an integral part of qualifying production activities. 
– Be located in the U.S. or its territories. 
– Have original use begin with the taxpayer (new build or first-time conversion to production use). 
– Be built between January 20, 2025 and December 31, 2028. 
– Be placed in service by December 31, 2030. 
– Be elected as Qualified Production Property (QPP) on the tax return. 

What’s Not Covered 

The following areas are not eligible for 100% bonus depreciation: 
– Administrative offices 
– Lodging 
– Parking 
– Sales areas 
– Research, software development, or engineering spaces 
– Any other non-production purposes 

Things to Watch 

– Recapture rules: If the property stops qualifying as QPP within 10 years, the accelerated depreciation may be recaptured as ordinary income. 
– Acquired property can still qualify if unused for production between Jan 1, 2021 and May 12, 2025, and other requirements are met. 
– State conformity is uncertain—some states may not allow the full bonus depreciation. 

Why It Matters 

For manufacturers, this provision offers a significant tax advantage. Being able to deduct the entire cost of a qualifying building in the first year can dramatically improve cash flow and return on investment, especially for new construction or converting idle industrial space into production use. 

Action Items 

1. Identify projects that may meet QPP criteria. 
2. Consider a cost segregation study to separate QPP-qualifying areas from non-qualifying areas. 
3. Track eligibility and placed-in-service deadlines. 
4. Evaluate state-level conformity. 
5. Model the effect on interest limitations, NOLs, and other tax attributes. 

Bottom Line 

Section 168(n) allows qualifying manufacturers to expense entire production facilities immediately. This is an unprecedented opportunity worth reviewing for any current or planned projects.