Tax Planning
Leveraging Depreciation Under the One, Big, Beautiful Bill: Brownfields, Sound Recordings, and Production Facilities
Learn how new IRS interim guidance under the One, Big, Beautiful Bill transforms depreciation rules for qualified production property (QPP) and additional first-year deductions—including impact for sound recordings and manufacturing facilities.
By NomadicTax Research Team • 5-8 min read • March 19, 2026
## Overview
The One, Big, Beautiful Bill Act (OBBBA), enacted July 4, 2025, introduced sweeping changes to the U.S. tax code—particularly the way businesses may claim depreciation and **bonus** deductions. The IRS recently released two interim guidance notices that provide critical information for taxpayers to **plan**, **elect**, and **optimize** depreciation deductions in this evolving landscape. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-issue-guidance-on-special-depreciation-allowance-for-qualified-production-property-announce-upcoming-proposed-regulations-under-the-one-big-beautiful-bill?utm_source=openai))
## Key Provisions Explained
| Topic | What's New | Who's Affected / Action Matters |
|---|---|---|
| **Special Depreciation Allowance for QPP** | Taxpayers may elect to deduct up to 100% of the unadjusted depreciable basis for **qualified production property** placed in service between July 4, 2025 and January 1, 2031. Guidance covers definitions (property, activity), when elections are made, and how recapture applies if the use changes. ([irs.gov](https://www.irs.gov/newsroom/treasury-irs-issue-guidance-on-special-depreciation-allowance-for-qualified-production-property-announce-upcoming-proposed-regulations-under-the-one-big-beautiful-bill?utm_source=openai)) | Manufacturers, agriculturists, refiners, and ANY business investing in real property integral to production. If considering such assets, define them carefully and track periods of use. |
| **Additional First Year Depreciation under §168(k)** | For property acquired after January 19, 2025, the bonus depreciation deduction is **permanently** 100%. There's flexibility: taxpayers may elect for reduced deductions (40% or 60% in certain long production-period property or aircraft). Also, **qualified sound recording productions** are newly included. ([irs.gov](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?utm_source=openai)) | Businesses with large capital investments—film/music producers, content creators, manufacturers. Evaluate whether reduced election makes sense, especially in years of high income where write-offs may push you into lower brackets. |
## Examples & Strategy
- **Example 1: Factory Investment** — A company builds a QPP facility on October 1, 2026 for $10M. Under the new allowance, it may elect to deduct the full $10M immediately, reducing taxable income. If later it repurposes part of the facility, recapture rules will apply—requiring partial reversal of depreciation. |
- **Example 2: Sound Recording Production** — A music label begins recording a new album in fiscal year ending after July 4, 2025. It can count the costs as eligible property, get full bonus depreciation upon release. Useful to time large recording projects accordingly. |
## Actionable Insights
- Review property acquisitions: Are they **QPP**? If yes, classify accordingly and document activities. Don't let definitions slip. |
- Make Elections explicitly: When electing under §168(n), follow IRS rules for timing and manner as laid out in the interim guidance. Missed elections may foreclose the bonus. |
- Coordinate with income projections: A 100% deduction is valuable, but timing matters. If you expect losses or carrybacks, using reduced percent election might reduce AMT or preserve loss absorption. |
- Consult professionals: Because recapture and definitions are complex, and because some property might have mixed uses, AIA might induce audits. |
## Conclusion
With IRS issuances in **Notice 2026-16** (qualified production property) and **Notice 2026-11** (additional first year depreciation) under the OBBBA, businesses have powerful tools—but must be intentional. By understanding eligibility, making timely elections, and aligning with business plans, taxpayers can maximize deductions and manage tax liability more efficiently.