Entity Setup
Maximizing Special Depreciation: What Global Businesses Should Know Under U.S. Tax Law
A deep dive into how the U.S. One, Big, Beautiful Bill’s new special depreciation allowance for qualified production property can be a game-changer for capital-intensive businesses.
By NomadicTax Research Team • 5-8 min read • March 27, 2026
## What’s Changed
Under the One, Big, Beautiful Bill (OBBB), U.S. taxpayers can **elect to take a 100% depreciation deduction** on *qualified production property* placed in service after **July 4, 2025** and before **January 1, 2031**.([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)) This is an expansion from previous rules that allowed lower percentages or excluded certain real property or production types. The government also provided **interim guidance** in Notice 2026-16 to define terms such as "qualified production property" and "qualified production activity", and explained how to handle depreciation recapture if the property's 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))
## Who Can Use This & Key Requirements
To benefit, a taxpayer must ensure their property meets the following criteria:
- It must be nonresidential real property used “as an integral part” of a *qualified production activity* (e.g. manufacturing, agriculture, refining) that results in *substantial transformation* of tangible property.([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))
- Property must be placed in service after July 4, 2025 and before January 1, 2031.([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))
- Original use must begin with the taxpayer (in many cases). Some used property may qualify under certain acquisition rules.([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))
- If property ceases being “qualified production property,” depreciation recapture rules apply: excess special depreciation claimed must be recaptured as ordinary income.([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))
## Practical Strategies & Examples
Here are actionable ways businesses and tax professionals can make the most of this:
| Scenario | Strategy |
|---|---|
| **Manufacturing plant invests in machinery** | Elect special depreciation in the first year placed in service (100%), reducing taxable income significantly in early years and improving cash flow. |
| **Agricultural operation planting specified trees/vines** | If trees qualify (pre-productive period >2 years, grafted after Jan 19 2025), may elect 100% special depreciation for those specific plants.([irs.gov](https://www.irs.gov/instructions/i4562?utm_source=openai)) |
| **Ownership changes or use changes** | Ensure tracking of use; recapture may be triggered if property is converted from qualified production activity to non-qualified use. |
## Caveats & Compliance Risks
- **Election is binding**: Once you elect to treat property as qualified production property, you generally cannot reverse it without IRS consent.([irs.gov](https://www.irs.gov/instructions/i4562?utm_source=openai))
- **Documentation required**: You must record definitions, place-in-service dates, use types; missing documentation can lead to IRS challenges. |
- **AMT and taxable income limits**: Special depreciation allowance can affect alternative minimum tax, limit deductions for certain taxpayers. |
## Global Implications for Multinationals & Investors
While this is a U.S. domestic law, international companies operating or investing in U.S. production facilities (or joint ventures) should consider structuring acquisitions to satisfy the qualified production property requirements—especially where substantial production, manufacturing or refining happens. Multinationals with global supply chains could benefit by locating qualifying production activities in the U.S. to leverage the 100% allowance, thus lowering after-tax cost of capital.
**Action Steps:**
1. Review capital expenditure plans to identify which assets might qualify.
2. Plan acquisitions or starts to ensure "original use" or acquisition rules are met.
3. Coordinate with accounting to file elections properly and track compliance.
4. Monitor regulatory guidance to adjust as proposed rules are finalized (IRS requested public comments).([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))
By aligning growth, investment, and tax strategy to the new special depreciation allowance, eligible taxpayers can unlock substantial tax savings—turning depreciation into a meaningful cash-flow tool rather than a delayed benefit.