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On February 20, 2026, the Department of the Treasury and the Internal Revenue Service (IRS) released Notice 2026-16, providing interim guidance on the special depreciation allowance for qualified production property enacted as part of the One, Big, Beautiful Bill Act (OBBBA). This statutory provision, added to Internal Revenue Code § 168(n), authorizes a temporary 100 percent "bonus" depreciation deduction for qualified production property placed in service within specified dates. Notice 2026-16 provides taxpayers with interim administrative rules ahead of formal proposed and final regulations addressing this new regime.
The Notice clarifies definitional and operational elements of the special depreciation allowance that are essential for compliance. It explains what constitutes qualified production property (generally nonresidential real property used as an integral part of a qualified production activity, such as manufacturing or refining, that results in a substantial transformation of property). The Notice also identifies the timeframes within which the property must be placed in service to qualify for the allowance, including possible extensions of time due to an "act of God." The interim guidance further addresses the mechanics of electing into the special depreciation regime and the necessary attachment of an election statement to timely filed income tax returns.
Notice 2026-16 also provides taxpayers with practical rules on property eligibility, including de minimis tests and safe harbors for determining whether a property meets the statutory criteria. This guidance is intended to be binding on taxpayers who follow its entirety, creating a workable framework for claiming the special depreciation allowance until the IRS issues proposed regulations that will formally implement the statutory provisions. Taxpayers and practitioners are encouraged to review the interim rules carefully and to provide comments by April 20, 2026 to assist the IRS and Treasury in refining the forthcoming regulations.
Notice 2026-16 represents an important step in the IRS's rollout of OBBBA's broad depreciation reforms by giving taxpayers clarity and operational certainty on the application of the new § 168(n) bonus depreciation rules while formal regulatory guidance is under development. For more information, contact Liskow attorneys Leon Rittenberg III, Caroline Lafourcade, and Kevin Naccari, and visit Liskow's Tax Practice page.
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