OBBBA Bonus Depreciation Notice Looks to TCJA Regs

Recently released Notice 2026-11 provides interim guidance implementing amendments to Section 168(k) for bonus depreciation enacted by the OBBBA. Taxpayers can rely on the notice for property placed in service in tax years before proposed regulations are published if the taxpayer follows the guidance in its entirety for all eligible property beginning with the first taxable year in which the taxpayer relies on the notice.

Background

As enacted by the Tax Cuts and Jobs Act of 2017 (TCJA), Section 168(k) provides a 100% additional first-year depreciation deduction for qualified property acquired after Sept. 27, 2017, with a scheduled phase-down of the applicable percentage to zero for property placed in service on or after Jan. 1, 2027 (and Jan. 1, 2028, for certain long‑production property and aircraft). Treasury Regulation Section 1.168(k)-2 sets TCJA bonus depreciation acquisition, binding contract, self‑construction, and placed‑in‑service rules and procedures for component elections and for Section 168(k)(5), (7), and (10) elections.

The OBBBA amends Section 168(k) to provide a permanent 100% additional first-year depreciation deduction for qualified property acquired and for specified plants planted or grafted after Jan. 19, 2025. The OBBBA also modifies Section 168(k)(10) to permit taxpayers to elect reduced percentages (40%, or 60% for certain long‑production property and aircraft) in the taxpayer’s first taxable year ending after Jan. 19, 2025. Additionally, the OBBBA adds qualified sound recording productions to the definition of qualified property for productions commencing in taxable years ending after July 4, 2025.

Notice 2026-11

Notice 2026-11 provides interim rules that generally apply the current Treasury Regulation Section 1.168(k)-2 to OBBBA bonus depreciation and explains how sound recording productions fit into the bonus depreciation framework.

Under the interim guidance, taxpayers generally should use the substance of Treasury Regulation Section 1.168(k)-2 to identify property that qualifies for OBBBA bonus depreciation and calculate their OBBBA bonus depreciation amount. The notice explains how the TCJA regulations should be modified to account for the OBBBA effective dates and the fact that OBBBA bonus depreciation is permanent.

For instance, taxpayers can use the Treasury Regulation Section 1.168(k)-2 written binding contract, nonbinding contract, and self‑construction start‑of‑work rules with the substituted dates to identify whether property or specified plants were acquired, planted, or grafted after Jan. 19, 2025. For qualified sound recording productions, taxpayers can treat the acquisition date as the date principal recording commences and the placed‑in‑service date as the initial release or broadcast.

Additionally, the notice allows taxpayers to make certain elections that were available for TCJA bonus depreciation, including the component election and other elections under Section 168(k)(5) (the election to take bonus depreciation on specified plants), Section 168(k)(7) (the election out of bonus depreciation for a particular class), and Section 168(k)(10) (the election to deduct 50% instead of 100% bonus depreciation). The notice instructs taxpayers making these elections to follow procedures consistent with Treasury Regulation Section 1.168(k)-2 and the instructions for Form 4562, “Depreciation and Amortization (Including Information on Listed Property),” and to attach required statements to their timely filed return (including extensions). The notice also addresses rules for bonus depreciation in the case of consolidated groups.

A cost segregation study can assist taxpayers in evaluating eligibility to make a component election under Treasury Regulation Section 1.168(k)-2 to claim bonus depreciation for certain components of a larger project that might not otherwise meet the OBBBA bonus depreciation effective dates.

Looking ahead

Notice 2026-11 explains when and how taxpayers can claim OBBBA bonus depreciation, including generous rules allowing application of certain TCJA elections (with modification). The notice also provides rules for applying these rules to sound recording productions and in the case of consolidated groups. Taxpayers should consult their tax advisers to determine how these interim rules affect them and whether additional bonus depreciation might be available.