Following SWACCA’s successful advocacy to secure inclusion of provisions in the One Big, Beautiful Bill Act (OBBBA) permanently extending 100% bonus depreciation under Section 168(k) of the Internal Revenue Code to allow businesses to immediately expense the full cost of qualifying new and used equipment, the Internal Revenue Service (IRS) issued interim guidance implementing this provision for qualified property acquired or placed in service after January 19, 2025 (and, as applicable, placed in service after that date).
Specifically, OBBBA amended Section 168(k) to: (1) remove the general requirement that qualified property be placed in service before January 1, 2027; (2) remove the requirement that certain property with longer production periods be placed in service before January 1, 2028, and acquired before January 1, 2027; (3) remove the provision treating the acquisition deadline for certain long production period property as satisfied if the taxpayer begins manufacturing, constructing, or producing self-constructed property before January 1, 2027; (4) replace the scheduled annual phasedown of the applicable percentage for the additional first year depreciation deduction with a permanent 100% additional first year depreciation deduction for qualified property acquired after January 19, 2025; and (5) allow taxpayers to elect to deduct 40% (60% for certain long-production-period property), instead of 100%, additional first year depreciation for qualified property placed in service during the first taxable year ending after January 19, 2025.
In the guidance, the IRS describes the process for determining whether depreciable property constitutes qualified property eligible for the additional first year depreciation deduction under Section 168(k), as well as how to calculate the deduction. The interim guidance clarifies how the dates established by OBBBA substitute for the dates in existing regulations, including those governing acquisition and placed-in-service requirements. The IRS also notes that it intends to issue proposed regulations consistent with this interim guidance and that taxpayers may rely on this interim guidance in its entirety for all eligible property placed in service in a taxable year beginning before the proposed regulations are published in the Federal Register.