The US Treasury and IRS released interim guidance on 20 February 2026 for a new 100% depreciation deduction on qualified production property under the One, Big, Beautiful Bill. The special allowance applies to manufacturing, chemical, agricultural, and refining facilities placed in service between 5 July 2025 and 31 December 2030, and taxpayers may rely on Notice 2026-16 until formal regulations are published.
The US Department of the Treasury and the Internal Revenue Service (IRS) announced on 20 February 2026 that it has provided interim guidance for taxpayers regarding the special depreciation allowance for qualified production property enacted under the One, Big, Beautiful Bill.
Notice 2026-16 announces that Treasury and the IRS will issue proposed regulations on a new provision of the law allowing taxpayers to elect to take a depreciation deduction up to 100% of the unadjusted depreciable basis of any qualified production property placed in service during a taxable year. Qualified production property is, generally, nonresidential real property used by a taxpayer as an integral part of a qualified production activity.
A qualified production activity is a manufacturing, chemical production, agricultural production, or refining activity that results in the substantial transformation of the property comprising a qualified product. In addition to other requirements, the special depreciation allowance only applies to qualified production property placed in service after 4 July 2025 and before 1 January 2031.
The notice provides interim guidance regarding the following: definitions of qualified production property and qualified production activity, how to determine the special depreciation allowance for qualified production property, and how and when an election to treat property as qualified production property is made.
The notice also explains how the depreciation recapture rules apply to property that ceases to meet the requirements to be qualified production property.
Taxpayers may rely on the guidance provided in Notice 2026-16 until proposed regulations are issued.
Treasury and the IRS also request comments on the interim guidance, including specific issues on which additional guidance is needed.
Comments should be submitted within 60 days of the issuance of the notice.
