Special Depreciation Allowance for Qualified Production Property
Section 70307 · Sec. 70307 ·
What this chapter is about
This part lets a firm write off the full cost of a new production building at once. Building work must start after January 19, 2025 and before 2029. The building must be in use before 2031. If its use changes within ten years, the break is clawed back.
The document says “shall”Who acts: Secretary of the TreasuryHow: statuteSec. 70307 in the PDF
What the document says
“the depreciation deduction provided by section 167(a) for the taxable year in which such property is placed in service shall include an allowance equal to 100 percent of the adjusted basis of the qualified production property, and”
The section adds a new subsection (n) to section 168 of the Internal Revenue Code of 1986. Where a taxpayer elects, the depreciation deduction for the year the qualified production property is placed in service includes an allowance equal to 100 percent of its adjusted basis, and the adjusted basis is then reduced by that deduction before working out any further depreciation for that or a later year.
What the document actually says
“the depreciation deduction provided by section 167(a) for the taxable year in which such property is placed in service shall include an allowance equal to 100 percent of the adjusted basis of the qualified production property, and”
That sentence, in plain words
The whole cost may be written off in one year. That is the year the building is put to use. The rate is 100 percent.
What this is about
The cost is then cut to zero on the books. So no further write-off is left. The firm must elect to use this.
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“The term `qualified production property' means that portion of any nonresidential real property--”
The section defines qualified production property as the portion of nonresidential real property to which section 168 applies, used by the taxpayer as an integral part of a qualified production activity, placed in service in the United States or a possession, whose original use begins with the taxpayer, whose construction begins after January 19, 2025 and before January 1, 2029, which the taxpayer designates in the election, and which is placed in service before January 1, 2031. Property used by a lessee does not count as used by a lessor taxpayer. Office space and similar areas are excluded, and a syndication rule applies.
What the document actually says
“The term `qualified production property' means that portion of any nonresidential real property--”
That sentence, in plain words
The term covers part of a building that is not a home. The tests that follow say which part.
What this is about
The building must be used in production. Work must start after January 19, 2025 and before 2029. It must be in use before 2031.
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The document says “shall”Who acts: Secretary of the TreasuryHow: statuteSec. 70307 in the PDF
What the document says
“such property was not used in a qualified production activity (determined without regard to the second sentence of subparagraph (D)) by any”
The section treats the original use and construction start tests as met for property acquired during the construction window where the property was not used in a qualified production activity by anyone from January 1, 2021 through May 12, 2025, was not used by the taxpayer before the acquisition, and the acquisition meets the requirements of paragraphs (2)(A), (2)(B), (2)(C) and (3) of section 179(d). A written binding contract fixes the acquisition date at both ends of the window.
What the document actually says
“such property was not used in a qualified production activity (determined without regard to the second sentence of subparagraph (D)) by any”
That sentence, in plain words
The building must not have been used in production. That is tested against a set window of years.
What this is about
That window runs from January 1, 2021 to May 12, 2025. The buyer must also not have used it before. A signed contract fixes the buying date.
No action is recorded against this proposal. That is not evidence that none has been taken, and nobody has yet read it against the record. See what the tracker does not yet cover.
“The term `production' shall not include activities other than agricultural production and chemical production.”
The section limits production to agricultural production and chemical production. A qualified product is any tangible personal property that is not a food or beverage prepared in the same building as a retail establishment where it is sold, and a taxpayer's activities must substantially transform the property making up the product.
What the document actually says
“The term `production' shall not include activities other than agricultural production and chemical production.”
That sentence, in plain words
The word production covers only two kinds of work. Those are farming and making chemicals.
What this is about
The goods made must be tangible. Food made and sold in the same shop does not count. The work must change the goods in a real way.
No action is recorded against this proposal. That is not evidence that none has been taken, and nobody has yet read it against the record. See what the tracker does not yet cover.
The document says “can”Who acts: Secretary of the TreasuryHow: statuteSec. 70307 in the PDF
What the document says
“The Secretary may extend the date under subparagraph (A)(vii) with respect to any property that meets the requirements of clauses (i) through (vi) of subparagraph (A)”
The section lets the Secretary put back the January 1, 2031 placed in service date for property meeting the other tests where an act of God, as defined in section 101(1) of the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, kept the taxpayer from placing it in service in time.
What the document actually says
“The Secretary may extend the date under subparagraph (A)(vii) with respect to any property that meets the requirements of clauses (i) through (vi) of subparagraph (A)”
That sentence, in plain words
The Secretary may put back the deadline. The building must still meet all the other tests.
What this is about
The delay must come from an act of God. An older law says what that means. That law is not indexed here.
No action is recorded against this proposal. That is not evidence that none has been taken, and nobody has yet read it against the record. See what the tracker does not yet cover.
The document says “shall”Who acts: Secretary of the TreasuryHow: statuteSec. 70307 in the PDF
What the document says
“If, at any time during the 10-year period beginning on the date that any qualified production property is placed in service by the taxpayer, such property ceases to be used as described in paragraph (2)(A)(ii)”
The section provides that where within ten years of being placed in service the property stops being used as an integral part of a qualified production activity and is used in another productive use, section 1245 of the Internal Revenue Code of 1986 applies as if the property had been disposed of at that time, with a floor on the amount taken into account, and the taxpayer's basis and depreciation allowance are adjusted accordingly.
What the document actually says
“If, at any time during the 10-year period beginning on the date that any qualified production property is placed in service by the taxpayer, such property ceases to be used as described in paragraph (2)(A)(ii)”
That sentence, in plain words
The clock runs for ten years from the day the building is put to use. If it stops being used in production, the rule below bites.
What this is about
The building is treated as if it had been sold. Tax is then owed on the break already taken. Its value on the books is adjusted.
No action is recorded against this proposal. That is not evidence that none has been taken, and nobody has yet read it against the record. See what the tracker does not yet cover.
The document says “may not”Who acts: Secretary of the TreasuryHow: statuteSec. 70307 in the PDF
What the document says
“Any election made under this subsection, and any specification contained in any such election, may not be revoked except with the consent of the Secretary (and the Secretary shall provide such consent only in extraordinary circumstances).”
The section requires the election to name the nonresidential real property it covers and the designated portion, and to be made on the taxpayer's return for the year except as the Secretary provides, in the manner the Secretary prescribes. The election and anything specified in it may not be taken back except with the Secretary's consent, which is to be given only in extraordinary circumstances. The Secretary must issue guidance on what counts as substantial transformation and on how the recapture rule works after a tax free transfer.
What the document actually says
“Any election made under this subsection, and any specification contained in any such election, may not be revoked except with the consent of the Secretary (and the Secretary shall provide such consent only in extraordinary circumstances).”
That sentence, in plain words
The choice may not be taken back. The Secretary may allow it in rare cases only.
What this is about
The choice is made on the tax return. It must name the building and the part covered. Once made it sticks.
No action is recorded against this proposal. That is not evidence that none has been taken, and nobody has yet read it against the record. See what the tracker does not yet cover.
“any qualified production property (as defined in section 168(n)(2)).”
The section adds a new subparagraph (G) to section 1245(a)(3) of the Internal Revenue Code of 1986 bringing qualified production property within that section, and applies the amendments to property placed in service after enactment. It also provides that for the alternative minimum tax the deduction is worked out without the adjustment under section 56, treats the property as a separate class for other special allowances with the taxpayer treated as having elected, and excludes property under the alternative depreciation system.
What the document actually says
“any qualified production property (as defined in section 168(n)(2)).”
That sentence, in plain words
The new kind of property is added to a list in the tax code.
What this is about
That list decides how gain is taxed on sale. The change reaches buildings put to use after this law. Nothing earlier is touched.
No action is recorded against this proposal. That is not evidence that none has been taken, and nobody has yet read it against the record. See what the tracker does not yet cover.
Each distinct thing the new subsection does: the 100 percent allowance and the basis reduction, the definition of qualified production property with its seven tests, the rule for property not previously used in production, the narrow meanings of production and a qualified product, the extension of the placed in service date for an act of God, the treatment for the minimum tax, the coordination with other allowances, the ten year recapture rule, the election and its revocation, and the treatment as section 1245 property with the effective date.
The exclusion of office space and similar areas, the syndication rule, and the regulations the Secretary must issue, which are carried in summaries.
The section adds a subsection to section 168 of the Internal Revenue Code of 1986 and points to many of its other provisions and to the Comprehensive Environmental Response, Compensation, and Liability Act of 1980, none of which is indexed here.
