Before you break ground: Tax timing moves manufacturers should model under OBBBA

By John Allen, CPA 

Part I: This brief article provides a “what to model” checklist. In Part II, we show QPP and cost segregation in action—how mixed-use space gets mapped, what typically gets reclassified, and how common lease structures can still qualify.

OBBBA turns manufacturing tax planning into a timeline decision.

For plant expansions, automation projects, and major equipment buys, the difference between ordering, starting construction, and placing assets in service can change when deductions hit—and that can impact cash flow.

Why timing matters more than ever.

Lead times, installation, and commissioning often push placed-in-service dates later than expected. Because key incentives hinge on when assets are acquired, when construction begins, and when property is placed in service, a schedule slip can shift deductions out of the year you were counting on.

Three tax levers to model before you commit.

Model these three levers against your project schedule and projected taxable income:

1) 100% bonus depreciation and qualified production property (QPP).

OBBBA restores 100% bonus depreciation for qualifying property placed in service on/after 1/20/2025 (subject to the law’s requirements). QPP may expand what qualifies—potentially including certain building/shell components used in qualified production activity. Part II shows what this can look like on a real facility: eligible vs. ineligible space in mixed-use plants, plus examples of building systems that may move out of 39-year treatment.

Modeling questions to ask:

• What assets qualify (equipment, certain improvements, and—via QPP—some building/shell components in production areas)?
• What is the earliest realistic placed-in-service date based on delivery, installation, and commissioning?
• If construction is involved, when does it “begin,” and how will you document it?

2) Domestic R&D treatment (Section 174).

Section 174 can apply to manufacturing product and process improvements. OBBBA is more favorable to domestic R&D, while foreign R&D generally remains subject to longer amortization—so where the work is performed can change project economics.

Modeling questions to ask:

• What costs are domestic vs. foreign for Section 174—and do you have prior-year amortization that could be accelerated based on available elections?

3) Section 179: targeted equipment expensing.

Section 179 can help target deductions to specific assets and years (subject to eligibility and limitations). With higher limits under OBBBA, it may complement bonus depreciation.

Modeling questions to ask:

• Do you want deductions concentrated in a higher-income year, or spread across years?
• Which assets are better suited for Section 179 vs. bonus depreciation?

Don’t overlook facility components (cost segregation).

If your project includes a building expansion or major improvements, cost segregation may identify shorter-lived components and accelerate depreciation. Part II walks through the kinds of building systems often reclassified in manufacturing facilities (sometimes 10–30% for light manufacturing and 40–50%+ for heavy), and how QPP can bring certain production-area building/shell components into play—especially in mixed-use and leased-entity structures.

Before you break ground: quick modeling checklist ✓ Timeline: order dates, delivery/installation, commissioning, expected placed-in-service ✓ Scope: equipment vs. building/land improvements; new vs. retrofit ✓ Construction documentation: when construction begins and support for that date ✓ Income projection: taxable income by year (base vs. expansion case)

 

Bottom line.

OBBBA can be meaningful for manufacturers—but the benefit often comes down to execution: what qualifies, how it’s documented, and whether placed-in-service dates land where you expect. For facility projects, Part II (Cost Segregation and QPP in Action) is the practical follow-up.

If you’re planning equipment purchases, automation, a renovation, or a plant expansion, Boyer & Ritter can help you model scenarios, evaluate eligibility, and coordinate the tax and engineering documentation needed to support the result.

Contact John Allen or any member of our Manufacturing Practice Group to discuss how these incentives could apply to your facility.