Written by Hayley Romero, Accountant
The One Big Beautiful Bill Act (OBBBA) includes significant changes to U.S. tax law with long-term implications for individuals, families, and business owners. This article focuses on Section 70307, which addresses qualified production property. For businesses that purchase equipment, machinery, certain plants, and other qualifying business properties, this provision provides an opportunity to write off the cost of those assets more quickly (Source: IRS).
Section 70307 of the OBBBA addresses qualified production property (Source: H.R.1-OBBBA). Specifically, there is a 100% first-year depreciation deduction allowed for qualified production property. The property must meet several requirements to qualify, including (Source: H.R.1-OBBBA):
Nonresidential real property.
- Used as an integral part of a qualified production activity.
- A qualified production activity includes “manufacturing, producing, or refining a qualified product”; however, the activity qualifies only if it results in a “substantial transformation” of the property used to create the final product (Source: H.R.1-OBBBA).
- Placed in service in the U.S. or any U.S. possession.
- The property’s original use begins with the taxpayer.
- Constructed or purchased after January 19th, 2025.
- Placed in service after July 4th, 2025.
For example, a manufacturer builds a new U.S. production facility after January 19th, 2025, and places it in service after July 4th, 2025. Because the building qualifies as qualified production property, the business can immediately deduct 100% of its cost in the year it is placed in service, rather than depreciating it over several years. By allowing businesses to immediately deduct the full cost of qualified production property, this provision can give businesses greater financial flexibility.
For businesses investing in qualified production properties, Section 70307 creates a significant tax planning opportunity by allowing a 100% first-year depreciation deduction (Source: IR-2026-06). Rather than recovering the cost of eligible property over many years, businesses may be able to deduct the entire cost sooner, potentially reducing taxable income.
To benefit from this provision, taxpayers must ensure they meet all qualification requirements. Businesses should maintain documentation demonstrating that the property satisfied these requirements. Businesses that fail to meet the requirements risk losing the deduction, among other things. Businesses planning to invest in qualified production property should evaluate whether those investments meet the requirements under Section 70307. Because eligibility depends on factors such as the type of property, its use, and when it is acquired and placed in service, careful planning is essential. Maintaining proper documentation and consulting with a tax advisor before making significant capital investments can help businesses maximize available tax benefits while remaining compliant.
Tax laws continue to evolve, and staying informed can help businesses identify valuable tax planning opportunities. Please contact Darnall, Sikes & Frederick if you are in search of additional guidance.
References
(Source: IRS) “Working Families Tax Cuts.” Internal Revenue Service, www.irs.gov/newsroom/working-families-tax-cuts
(Source: H.R.1-OBBBA) https://www.congress.gov/bill/119th-congress/house-bill/1/text
(Source: IR-2026-06) https://www.irs.gov/newsroom/treasury-irs-issue-guidance-on-the-additional-first-year-depreciation-deduction-amended-as-part-of-the-one-big-beautiful-bill