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Article

Interim guidance issued to implement OBBBA bonus depreciation amendments

Feb. 16, 2026 · Authored by Kathleen Meade

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  • Federal Tax
  • Tax

On Jan. 14, 2026, the IRS issued interim guidance in Notice 2026-11 (the Notice) to apply favorable bonus depreciation amendments under the One Big Beautiful Bill Act (OBBBA), which permanently restored full expensing for certain qualified property. In the Notice, the IRS states that it intends to issue proposed regulations consistent with the Notice provisions. As anticipated, the preliminary guidelines align with existing bonus depreciation rules provided under the Tax Cuts and Jobs Act (TCJA), which should facilitate timely implementation of the new law in the upcoming 2025 tax filing season. Taxpayers may rely on the Notice prior to the date the proposed regulations are published in the Federal Register, provided the provisions are applied in their entirety for all eligible property acquired and placed in service during the timeframes specified in the guidance. See our recent article for more information.

This alert summarizes key provisions and implications of the Notice.

Special allowance for qualified production property - Unfortunately, the Notice does not provide guidance for taxpayers looking to implement the temporary and time sensitive amendment that permits full expensing for certain qualified production property under section168(n), such as factories. However, an IRS official speaking at an industry conference this week indicated that the IRS is “actively working” on this guidance, although no release date was provided. Baker Tilly is closely monitoring the situation and will provide updates as developments occur.

Takeaways

  • The Notice provides welcome certainty that taxpayers may rely on the principles in the existing bonus depreciation rules to apply the OBBBA, including the “written binding contract” rules used to determine whether the acquisition date requirement in the OBBBA is satisfied (an important concern for taxpayers that made significant property additions near the OBBBA cutoff date of Jan. 20, 2025).
  • The ability to rely on the interim guidance immediately is good news for taxpayers looking to maximize depreciation deductions in 2025, including those with disallowed interest deductions that may benefit from the depreciation addback under section 163(j) that was restored under the OBBBA.
Kathleen Meade

Kathleen Meade

Director

Related sections

  • Federal Tax
  • Tax
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The information provided here is of a general nature and is not intended to address the specific circumstances of any individual or entity. In specific circumstances, the services of a professional should be sought. Tax information, if any, contained in this communication was not intended or written to be used by any person for the purpose of avoiding penalties, nor should such information be construed as an opinion upon which any person may rely. The intended recipients of this communication and any attachments are not subject to any limitation on the disclosure of the tax treatment or tax structure of any transaction or matter that is the subject of this communication and any attachments.

  • The Notice also provides guidance for making certain elections and for the treatment of sound recordings under the OBBBA full expensing provisions, as further discussed below.
  • Taxpayers that produce qualified sound recording productions (e.g., music and media industries, podcasters, production studios) will want to promptly evaluate whether and when to implement the favorable new provision permitting them to claim bonus depreciation for these productions, which was previously only available for film, TV and live theater properties.

    • Background

    Section 70301 of the OBBBA permanently restores 100% bonus depreciation for qualified property acquired and placed in service after Jan. 19, 2025. Significantly, for purposes of determining eligibility to claim the additional first year depreciation under the OBBBA, a property is not treated as acquired after the date a written binding contract is entered into for such acquisition. In lieu of full expensing, a taxpayer may elect to deduct 40% (60% for certain property having longer production periods or certain aircraft) for qualified property placed in service during the first tax year ending after Jan. 19, 2025. See the Baker Tilly year-end tax planning insight for further discussion of the OBBBA full expensing provisions.

    Section 70434 of the OBBBA adds qualified sound recording productions to the list of expenses eligible for immediate deduction (up to $150,000) under section 181, thereby making them eligible for bonus depreciation, consistent with the treatment currently afforded to film, TV and live theater productions. Note: the deduction under section 181 is only available for productions that commenced prior to Jan. 1, 2026.

    Notice 2026-11

    Sections 3 through 5 of the Notice contain interim guidance under the OBBBA amendments for determining property eligible for full expensing (section 3), making certain bonus depreciation elections (section 4) and treating certain sound recordings as qualified property eligible for bonus depreciation (section 5). As noted, the preliminary guidance is essentially consistent with the existing bonus depreciation rules issued under the TCJA. Key provisions in the interim guidance are summarized as follows:

    • Section 3 - provides that the existing rules in sections 1.168(k)-2 and 1.1502-68 (as modified by the OBBBA) are applied to determine whether property is “qualified property” eligible for bonus depreciation and the amount of the bonus depreciation deduction. Notably, this guidance retains the favorable election to treat certain components of self-constructed property as eligible for bonus depreciation and provides certainty that a taxpayer may apply the existing “written binding contract” provisions under section 1.168(k)-2(b)(5) to determine whether a qualified property was acquired after Jan. 19, 2025, such that it qualifies for full expensing under the OBBBA.
    • Section 4 – provides that a taxpayer follows the existing rules and procedures in section 1.168(k)-2(f) (as amended by the OBBBA) for electing to take bonus depreciation for certain “specified” fruit and nut bearing plants under section 168(k)(5), or for claiming reduced bonus depreciation under section 168(k)(10) (40% or 60%, as applicable)
    • Section 5 – provides that, for purposes of determining bonus depreciation, the forthcoming proposed regulations will treat a qualified sound recording production consistent with existing bonus depreciation provisions applicable to film, TV and live theater productions. The Notice specifies that the acquisition date used to determine eligibility of a qualified sound recording for bonus depreciation under the OBBBA is the date that principal recording commences. Bonus depreciation is claimed in the year the property is placed in service, which occurs at the “time of the initial release or broadcast under section 168(k)(2)(H)(iii),” as amended under the OBBBA. An election to “opt out” of bonus depreciation under section 168(k)(7) is made using the existing rules and procedures under section 1.168(k)-2(f). The opt out election is made on a property-by-property basis (i.e., for each separate production as defined using principles consistent with section 1.181-3(b)).

    Baker Tilly’s National Tax professionals will continue to monitor the situation, providing timely updates and strategic insight as your source in Washington. If you have questions on how this may impact your tax situation, please contact your Baker Tilly tax advisor. 

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