Section 168(n) for Oregon Manufacturers: Writing Off Your Steel Building in Year One

Section 168(n) of the Internal Revenue Code lets a manufacturer deduct 100 percent of the cost of a new building's production space in the year it is placed in service, instead of depreciating it over 39 years. It was added by the One Big Beautiful Bill Act in 2025.

This is an overview, not tax advice. Your CPA confirms qualification, and your builder and engineer confirm what the building needs to support the use.

What Qualified Production Property is

Qualified Production Property (QPP) is nonresidential real property used as an integral part of a qualified production activity: manufacturing, agricultural or chemical production, or refining that substantially transforms a product into a distinct item. QPP is eligible for 100 percent bonus depreciation in the year it is placed in service. The taxpayer elects it on a timely filed original return.

Source: IRS Notice 2026-16, which also sets the list of qualifying business codes.

Who qualifies

Businesses whose building is the workspace for making or transforming a physical product may qualify, such as cabinet shops, fabrication shops, and machining operations. Food, drink, and agricultural processing depend on the IRS definitions and code list, so check with your CPA early.

Who does not qualify

Offices, administrative space, and other areas unrelated to production do not qualify. In a mixed-use building, the production portion qualifies. As an illustration, in a 6,000 square foot building with a 5,000 square foot production floor and a 1,000 square foot office, the office would depreciate on the standard schedule. The IRS also allows the whole building to be treated as qualifying if at least 95 percent of its space is used for qualified production.

The deadlines

• Construction must begin after January 19, 2025 and before January 1, 2029.
• The building must be placed in service after July 4, 2025 and before January 1, 2031.

The IRS points to its existing bonus depreciation rules to decide when construction begins. Ask your CPA how to document the start date. Engineering, permitting, and ordering steel all come first, so plan well before the 2029 cutoff.

The recapture risk

If the building stops being used for qualified production within 10 years of being placed in service, the previously deducted depreciation can be recaptured as ordinary income. If you are confident the building will stay in production use, the risk is low.

Records to keep

Interim IRS guidance (Notice 2026-16) governs until final regulations are issued. Keep:

• Drawings showing which space is dedicated to production
• A square-footage breakdown of production and non-production space
• Records of construction start and placed-in-service dates
• Records of actual production use after the building is in service

Building versus leasing

Because the deduction is available to the business that owns and uses the building, it can change the own-versus-lease math for manufacturers. The IRS has signaled that the benefit is aimed at operating businesses, not passive landlords. Run both scenarios with your CPA.

Oregon

Oregon (SB 1507, signed April 2026) decouples from federal Section 168(k) bonus depreciation for property placed in service in tax years beginning on or after January 1, 2026. Per reports on the bill, it does not decouple from Section 168(n). Confirm with your CPA or the Oregon Department of Revenue how QPP flows through your Oregon return. Source: RSM summary of SB 1507.

Bottom line

Section 168(n) is a time-limited federal deduction for manufacturers. Construction must begin before January 1, 2029, so decide early. The QPP tax savings calculator gives a planning number, not a tax filing. For buildings, see commercial steel buildings or request a quote.