The Senate’s version of the One Big Beautiful Bill features a temporary tax break aimed at boosting investment in American manufacturing and energy infrastructure.
A lesser-known provision, Section 70307, would allow businesses to immediately deduct 100% of the costs for new “qualified production property” put into service over the next three years.
This incentive applies to a variety of assets, including new buildings and facilities for manufacturing, natural resource extraction, electricity and natural gas production, water systems, and waste disposal.
To qualify, the property must be new, utilized within the United States, and placed in service between January 1, 2024, and December 31, 2026.
There’s no phase-in or phase-down period; the full deduction is available only within this timeframe. Properties placed in service after December 31, 2026, will not qualify under current law.
While previous bonus depreciation rules under Section 168(k) of the Internal Revenue Code allowed for partial expensing of equipment purchases, this new proposal extends immediate expensing to physical structures—a category that traditionally faced longer depreciation timelines.
This provision seems designed to spark a wave of near-term industrial construction, potentially accelerating projects that might have otherwise been postponed.
Economists suggest that such “front-loaded” incentives can create temporary booms in capital spending, especially when businesses contend with lengthy permitting and construction lead times.
The depreciation allowance is part of a broader legislative package addressing tax credits for families, housing, and clean energy. However, unlike many of the bill’s headline items, this expensing provision could subtly influence the economics of factory siting and utility development.
Policymakers have increasingly emphasized the need to rebuild domestic capacity in strategic sectors, particularly in light of supply chain disruptions and energy price fluctuations.
This temporary tax break adds to a growing list of federal efforts to encourage onshoring of industrial investment, alongside expanded manufacturing tax credits, permitting reform, and loan guarantees for large-scale infrastructure projects.
While the exact budgetary impact of this provision remains uncertain, analysts note that full expensing mainly shifts the timing of tax deductions rather than creating permanent revenue losses.
Nonetheless, the short-term effects on the deficit could be significant if companies accelerate capital projects to take advantage of this expiring benefit.
The bill now moves to the House, where discussions about its broader fiscal and policy implications are expected to heat up. If passed in its current form, the depreciation provision could represent one of the most substantial tax incentives for U.S. factory construction in years.
