If you’re planning a new plant or major expansion in the U.S., the One Big Beautiful Bill Act (OBBBA) just changed the math.
The new IRC §168(n) created Qualified Production Property (QPP) deduction, an elective 100% first-year deduction for certain production-integral portions of nonresidential real property. For qualifying projects, what used to be a 39-year write-off can shift into year one, dramatically improving cash flow and payback.
So, what does this mean? QPP is the part of your U.S. facility that is integral to actually making a product, not the front office, not the parking lot.
Think: production bays, clean rooms, process utilities and structures that turn an input into a different, saleable product. To qualify, that portion of the building must be:
- Nonresidential real property (factory/plant/production facility)
- Located in the United States
- Used by you as an integral part of a qualified production activity
- Originally used by you (with limited exceptions for unused property)
- Constructed and placed in service within specific timing windows (more below)
What qualifies and what doesn’t:
Under current law, QPP is tied to specific types of qualified production activities that involve a substantial transformation of tangible personal property.
Activities:
- Manufacturing (metal fabrication, electronics assembly, injection molding, food/beverage processing lines, pharma/biotech suites)
- Refining (petroleum or metals)
- Production as defined by the statute is only agricultural and chemical production (other industries can qualify under the manufacturing or refining prongs)
Statutory exclusions:
- Offices/admin, sales/retail, lodging, parking, research, software development/engineering spaces are out
- Property subject to Alternative Depreciation System (ADS) is out
- Lessor note: If you’re a lessor, property used by a lessee doesn’t satisfy your activity test
Timing Matters:
- Begin-construction window: After January 19, 2025, and before January 1, 2029
- Placed-in-service deadline: Before January 1, 2031
Location/Use:
- Placed-in-service in the United States
- Original use generally begins with the taxpayer
Risk management:
- 10-year recapture: If a QPP area stops being used as an integral part of qualifying activity within 10 years, §1245 recapture may apply
- Alternative Minimum Taxable Income (AMTI): Under current law, the QPP deduction is available for both regular tax and AMTI
- Consult with your tax advisor early. We work alongside your tax team to coordinate the design, schedule, and cost coding so your election is supported by drawings, bid packages, and certificates of completion
How an experienced GC makes QPP a reality:
Preconstruction Planning:
- Map eligible vs excluded spaces early
- Design the “integral” systems cleanly
Schedule & Delivery:
- Align the project schedule with tax deadlines
- Document everything
Recapture-Proofing the layout:
- Plan for future changes
Common project types → likely prong:
- Metal fab / machining / assembly: Manufacturing (production bays, line-integrated QC, process MEP in; offices/admin out).
- Electronics assembly: Manufacturing (SMT lines, ESD flooring, process HVAC in; dev labs/offices out).
- Food & beverage processing: Manufacturing (process rooms, clean utilities, in-line packaging in; retail taproom/front-of-house out).
- Pharma/biotech: Manufacturing and/or chemical production depending on step (GMP suites, WFI/clean steam in; R&D out).
- Chemical plants: Chemical production (reactors, tanks, pipe racks, control rooms integral to process in; corporate offices out).
- Refineries/smelters: Refining (process units/utilities in; training/office blocks out).
- Indoor ag/greenhouses: Agricultural production (grow rooms, fertigation, environmental controls in; sales/admin out).
- Standalone warehouses, distribution centers, and data centers generally don’t qualify for QPP because there’s no qualifying production activity.
Owner checklist:
If you’re considering a 2026-2029 build or expansion, here’s a practical starting checklist.
- Confirm qualifying activity (manufacturing, refining, agricultural-or-chemical production)
- Map the building
- Align milestones to statutory windows (begin construction; placed-in-service)
- Set up cost codes correctly
- Plan commissioning & documentation to support the §168(n) election
- Coordinate with tax counsel / CPA
- Design with recapture in mind
Ready to build smarter?
If you are looking at an expansion or new facility in 2026 or beyond, the earlier QPP is on the table, the more options you have.
Eagan Building Group helps manufacturers and producers:
- Validate QPP opportunities alongside your tax team
- Design for clear QPP vs. non-QPP boundaries
- Schedule to meet begin-construction / placed-in-service windows
- Coordinate drawings, cost codes, and close-out documentation to support your election
Contact Us:
info@buildwitheagan.com | (636) 390-3220
Important disclaimer:
General information, not tax advice. Consult your tax advisor about your specific facts and the §168(n) election. IRS and Treasury guidance on §168(n) is still in progress and there are many unanswered questions. The information provided above is current as of late 2025.
Further Reading:
Limited Benefit From Potential New Domestic Manufacturing Incentives
OB3 provides bonus depreciation, qualified production property: PwC
The One Big Beautiful Bill Breakdown: Qualified Production Property
