New Tax Opportunity: How Florida Manufacturers Can Save With Qualified Production Property

The manufacturing industry in Florida has a significant opportunity to boost cash flow and reduce tax liability thanks to the recently passed One Big Beautiful Bill Act (OBBBA). This legislation introduced Qualified Production Property (QPP), an innovative tax provision allowing manufacturers to immediately deduct 100% of certain real property costs used in production activities.

Florida’s robust manufacturing industry, comprising over 20,000 manufacturing establishments that employ more than 380,000 workers, could generate substantial tax savings on facility investments and improvements.

How QPP Changes the Tax Landscape for Manufacturing Properties

Traditionally, items classified as real property—including a building’s structural components, walls, roofing, and general lighting systems—were depreciated over 39 years for tax purposes. This extended timeline significantly reduced the present value of these deductions.

QPP alters this approach by allowing qualifying manufacturing companies to deduct these costs immediately. When combined with the permanent extension of 100% bonus depreciation for tangible personal property, manufacturers can potentially write off all production-related assets in their facilities in the year they’re placed in service.

What Property Qualifies for the QPP Deduction?

To qualify for QPP treatment, real property must be:

• Used as an integral part of a qualified production activity
• Placed in service after July 2, 2025, and before January 1, 2031
• Constructed beginning after January 19, 2025, and before January 1, 2029

Qualified production activities generally include manufacturing tangible personal property, chemical production, agricultural production, and refining operations—all important sectors in Florida’s diverse economy.

Eligible components within production areas may include:

• Structural walls
• General lighting
• Building HVAC systems
• Plumbing lines
• Insulation
• Roofing

It’s important to note that only production-related areas qualify. Spaces dedicated to offices, administration, lodging, research, or warehousing are specifically excluded from QPP treatment.

Strategic Planning Considerations for Florida Manufacturers

Manufacturers looking to maximize QPP benefits should consider several important factors:

1. Property Ownership Structure: Current QPP rules indicate leased property would not be eligible. This might affect companies using separate real estate holding entities, a common practice among Florida manufacturers.
2. Recapture Provisions: If QPP ceases to be used for a qualified purpose during the 10-year period after being placed in service, a portion of previously claimed depreciation must be recaptured and added back to taxable income.
3. Election Timing: The QPP election must be made on a timely filed return in the year the property is placed in service and can only be revoked with Treasury consent in extraordinary circumstances.
4. Integration with Existing Tax Strategies: Organizations should evaluate how QPP interacts with other tax attributes such as net operating losses or credit carryforwards.

Maximize Benefits with Cost Segregation Studies

A strategic approach to identifying QPP-eligible property components involves conducting a cost segregation study. This engineering-based analysis separates building components into different asset classifications for tax purposes.

For Florida manufacturers with substantial real estate investments, a cost segregation study can help identify which portions of a facility qualify for QPP treatment and which may be eligible for bonus depreciation as personal property. This detailed analysis ensures no eligible deductions are missed.

Plan Your Manufacturing Facility Strategy

For Florida manufacturers considering facility expansions or improvements, the timing implications of QPP are significant. With construction required to begin after January 19, 2025, companies planning capital investments should align their timelines accordingly.

Consider this planning scenario: A manufacturing company in Central Florida is evaluating whether to purchase an existing warehouse or build a new production facility. With QPP, the tax implications become a critical factor in this decision. Building a new facility dedicated entirely to production activities could maximize QPP benefits, while renovating an existing structure might require careful planning to ensure qualification.

How Florida Manufacturers Can Prepare Now

With QPP implementation still developing, manufacturers should work with experienced advisors to prepare for this valuable opportunity. Here are key steps to consider:

1. Evaluate upcoming capital expenditure plans that might qualify for QPP
2. Review current real estate ownership structures
3. Document production vs. non-production areas in existing facilities
4. Consult with tax professionals familiar with manufacturing incentives

The Bottom Line for Florida Manufacturers

The introduction of QPP represents a significant tax planning opportunity for Florida’s manufacturing sector. With proper planning and expert guidance, manufacturers can potentially realize substantial tax savings on their facility investments while improving cash flow during critical growth periods.

Make business decisions backed by insight, not speculation.
Partner with our advisors to gain practical strategies for growth in Florida’s changing manufacturing and real estate markets. Learn more.

All content provided in this article is for informational purposes only. Matters discussed in this article are subject to change. For up-to-date information on this subject please contact a James Moore professional. James Moore will not be held responsible for any claim, loss, damage or inconvenience caused as a result of any information within these pages or any information accessed through this site.