On July 4, 2025, President Trump signed into law the One Big Beautiful Bill (OBBB). The legislation makes permanent many provisions of the 2017 Tax Cuts and Jobs Act (TCJA) that were set to expire at the end of this year.
Key highlights for CPA firms and their clients:
- Bonus depreciation (subject to binding contract restrictions) has been restored to 100% for property acquired on or after January 20, 2025.
- Section 179 deduction limits increased from $1.25 million to $2.5 million, with the phase out beginning at $4 million.
- Opportunity Zones reworked and made permanent, with special emphasis on rural investment.
- Introduction of Qualified Production Property (QPP), a new incentive for domestic manufacturers.
What Is Qualified Production Property (QPP)?
Added as an amendment to Section 168, the special allowance for Qualified Production Property is designed to encourage U.S. manufacturing by allowing taxpayers to deduct 100% of the adjusted basis of QPP in the first taxable year the property is placed in service.
Requirements include:
- Original use requirement applies (unless not used in production from 1/1/21 to 5/12/25)
- Construction must begin after January 19, 2025, but before January 1, 2029
- Property must be placed in service by January 1, 2031
- Binding contract restrictions apply to determine eligibility
- Depreciation recapture applies if property loses eligibility within 10 years
What Property Qualifies?
The statute defines Qualified Production Property as “Any portion of any nonresidential real property…which is used by the taxpayer as an integral part of a qualified production activity.” (OBBB, Sec. 168(k)(10)(B)(i))
However, the law also makes explicit exclusions: “…shall not include that portion of any nonresidential real property which is used for offices, administrative services, lodging, parking, sales activities, research activities, or other functions unrelated to the manufacturing, production, or refining of tangible personal property.” (OBBB, Sec. 168(k)(10)(B)(ii))
This means production-dedicated areas like foundations, wall framing, roof construction, and roof coverings may qualify for 100% bonus depreciation, even though such assets are not typically eligible.
Qualified Production Activity Defined
The law defines a Qualified Production Activity as “the manufacturing, production, or refining of a qualified product.” (OBBB, Sec. 168(k)(10)(C)(i))
And a qualified product as “any tangible personal property if such property is not a food or beverage prepared in the same building as a retail establishment in which such property is sold.” (OBBB, Sec. 168(k)(10)(C)(ii))
This raises key questions for CPAs and taxpayers:
- Does the manufacture of real property items (e.g., HVAC equipment, water heaters) qualify?
- Could food production qualify if no retail sales occur onsite?
IRS guidance and case law will be crucial as these issues are challenged.
Why QPP Matters for CPA Firms
The creation of QPP represents a major opportunity for manufacturers but also requires careful analysis. CPA firms should prepare their clients by:
- Conducting detailed real and personal property reviews.
- Leveraging engineering-based cost segregation studies to document eligibility.
- Planning around timing restrictions and binding contract rules.
For manufacturing facilities—already strong candidates for accelerated depreciation—the QPP provision makes cost segregation even more valuable.
Next Steps
The Qualified Production Property rules provide powerful new planning tools, but they also add complexity. CPA firms advising manufacturing clients will need to evaluate facilities carefully to maximize benefits and defend claims under IRS scrutiny.
Reach out to our Fixed Asset Services team today to determine if your client’s new facility may qualify for QPP treatment under the One Big Beautiful Bill.
