100% Factory Write-Offs Under Notice 2026-16 (QPP Rules)

For decades, the tax code treated a factory building the same as any other commercial real estate: 39 years of straight-line depreciation, with occasional cost segregation to peel off five and seven year components. That framework changed with the One Big Beautiful Bill Act (OBBBA). New Section 168(n) creates a category called Qualified Production Property (QPP) and allows 100 percent bonus depreciation on the structure itself.

For any Idaho or Utah manufacturer building a plant right now, expanding an existing facility, or converting a warehouse to production use, that is one of the most consequential tax changes in a generation. Notice 2026-16 provides the first meaningful guidance on how the rules work, what qualifies, and which projects will realize the benefit.

What Qualified Production Property (QPP) Means

QPP is nonresidential real property used as an integral part of a qualified production activity. The activity has to be the manufacturing, production, or refining of a qualified product, and the product has to be tangible personal property that results in a substantial transformation. Assembly of finished imported components generally does not qualify. Actual production, machining, chemical processing, food processing, and similar transformation activities generally do.

The property has to be located in the United States, placed in service in a qualified production activity, and originally used by the taxpayer or an unrelated party.

Placed-in-Service Windows

Two dates matter. Construction must begin after January 19, 2025 and before January 1, 2029. The property must be placed in service before January 1, 2031. Buildings that were substantially complete before the OBBBA effective date are generally out. Buildings mid-construction on that date may qualify for the portion of basis attributable to work performed after the effective date, subject to the transition rules in Notice 2026-16.

The “begin construction” test tracks the physical work test used elsewhere in the code. Site prep, foundation pours, and structural framing count. Design work, permitting, and financing do not.

What Counts as a Qualified Production Activity

The statute and the Notice draw the line at substantial transformation. Idaho examples that clearly qualify include potato processing plants, dairy processing facilities, cheese production, meat processing, and industrial fabrication. Utah examples include aerospace component machining, medical device manufacturing, and food and beverage production.

Warehousing, distribution, packaging-only operations, and pure assembly of imported parts generally do not qualify. Mixed-use buildings require an allocation between qualified and non-qualified square footage; the Notice includes safe harbors for buildings that are at least 90 percent qualified use.

Structures vs. Land vs. Personal Property

QPP applies to the building shell and non-personal-property components. It does not apply to land, land improvements, or personal property already depreciable under existing bonus rules. In practice, this expands what a cost segregation study can capture. The 39-year building shell that was previously stuck at slow depreciation now qualifies for 100 percent write-off if the QPP tests are met, while cost-segregated personal property continues on its existing five, seven, or fifteen year lives.

Election Mechanics and Deadlines

The taxpayer elects QPP treatment on the return for the year the property is placed in service, using the mechanics in Notice 2026-16 for the initial election window. The election is generally irrevocable without IRS consent. Any manufacturer near the placed-in-service line should coordinate with their tax advisor before year-end to lock in the treatment on the correct return.

Interaction with Cost Segregation Studies

Cost segregation remains valuable even under QPP. A good study accomplishes three things: it isolates land improvements (which sit outside QPP), it identifies personal property with shorter depreciable lives (which may accelerate over even a 100 percent write-off), and it produces documentation that supports the QPP allocation for mixed-use buildings.

For an Idaho food processor building a new plant in Bingham County or a Utah medical device manufacturer expanding in Provo, the layered play is straightforward: QPP treatment on the qualifying structure, cost segregation on the surrounding personal property and land improvements, plus continued bonus depreciation on equipment.

Notice 2026-16 is dense, and QPP eligibility turns on facts that need to be documented before the shovel goes in the ground, not after the building is complete. The manufacturing team at Cooper Norman has been running QPP analyses for clients across the Snake River corridor and the Wasatch Front since the Notice dropped. If you are planning or already building a facility that could qualify, our tax planning group can model the write-off against your projected income and help you sequence the paperwork.

This overview is general information, not tax advice for your specific business. Talk with a Cooper Norman advisor about how these rules apply to your operation.