The Trump Administration focused their efforts in the One Big Beautiful Bill to create conditions that would incentivize the re-industrialization of the United States after multiple generations of presidential administrations doing the opposite. One of the strongest incentives offered is accelerated depreciation for “Qualified Production Properties”. Unless you happen to be a tax accountant, the federal alphabet soup may not make much sense. In laymen’s terms, it means a new manufacturing location and the manufacturing equipment you put in it can be written off of your tax bill in the first year it is put in service. Think about that for a minute. If you have been thinking about upgrading your manufacturing equipment, there has never been a better time to pull the trigger.
For a company doing what the IRS considers qualified production activities, which is a very broad designation, your company could purchase new equipment in a new building and get paid back in a year in tax savings. Why wouldn’t you get the most efficient production equipment available? Improved efficiencies will flow directly to the bottom line and continue into the future. On top of that, the old equipment and real estate can be liquidated after the new operation is up and profitable.
And, there is yet another motivator. If your company is currently producing products in Mexico or Canada, the customers in your largest market are having to pay the 25% tariffs, or your company’s margin is eaten up by absorbing some of the tariff costs. Moving production to the US into an almost free factory that can lower the cost of your product by 25% is a very powerful combination of incentives.
We recently have been approached by just such a manufacturer from a neighboring country. The need for speed has been top of mind from the beginning. Fast-tracking acquisition, design and permitting has been the focus. This will be a true game changer for our client and for the community where they locate. The IRS has been slow to clarify all the details of how the program will be implemented, but they have just issued guidance that will help even more companies make the strategic decision to make the move.
This program works for any company looking to improve manufacturing efficiencies even if they are not subject to tariffs. If you like your current workforce, you can build new in the same community. If workforce issues are an on-going struggle, then a new location can be sought or simply added capacity if your market demand is strong. The window of opportunity will close in January 2029. Take advantage now. This opportunity will not be repeated.
