The U.S. Department of the Treasury and the Internal Revenue Service have released Notice 2026-11, providing important guidance on the permanent 100% additional first-year depreciation deduction enacted under the One, Big, Beautiful Bill (OBBB).
This update has significant implications for organizations that acquire or construct depreciable property, including nonprofits with taxable activities and organizations with unrelated business income.
What Is Additional First-Year Depreciation?
Under general tax rules, most business property must be depreciated over several years using prescribed recovery periods. Additional first-year depreciation (often referred to as “bonus depreciation”) allows taxpayers to deduct a large portion of the cost of qualifying property in the year it is placed in service, rather than spreading the deduction over time.
The OBBB made this benefit permanent at 100% for certain qualifying property, providing immediate expensing and improved cash-flow planning opportunities.
Key Provisions in Notice 2026-11
1. Permanent 100% Deduction
Qualified depreciable property acquired (or certain plants planted or grafted) after January 19, 2025 may be eligible for a full first-year deduction.
2. Reliance on Existing Regulations
Taxpayers may generally continue to rely on current bonus depreciation regulations while applying the new law, providing continuity and administrative certainty.
3. New Election Options
Taxpayers may elect:
- To claim 40% (or 60% for certain long-production property and aircraft) instead of 100% bonus depreciation for qualified property placed in service in the first tax year ending after January 19, 2025
- To apply additional first-year depreciation to certain specified plants
- To treat qualifying components of larger self-constructed property as eligible for bonus depreciation
- To opt out of additional first-year depreciation for qualified sound recording productions
4. Qualified Sound Recording Productions
The OBBB expanded eligibility to include certain sound recording productions. Under the interim guidance:
- The production is treated as acquired when principal recording begins
- It is placed in service upon initial release or broadcast
- It may qualify for bonus depreciation if recording begins in a tax year ending after July 4, 2025
Why This Matters for Nonprofit Organizations
While tax-exempt organizations do not generally benefit from depreciation deductions, these rules are highly relevant when:
- The organization operates unrelated business activities subject to Form 990-T
- The organization owns taxable subsidiaries
- Significant capital assets are used in revenue-generating activities
- Cost allocation between exempt and taxable activities is required
- Long-term facility or equipment planning is underway
Accelerated depreciation can materially affect taxable income, estimated tax payments, financial projections, and compliance planning.
How TrimnerBeckham Can Help
Understanding how the permanent 100% first-year depreciation rules apply requires careful analysis of:
- Property eligibility
- Placed-in-service dates
- Election planning
- Cost segregation opportunities
- Interaction with unrelated business income
- Financial statement and tax reporting impacts
TrimnerBeckham advises nonprofit organizations and related entities on the proper application of depreciation rules, UBI planning, and compliance under evolving federal tax law.
Organizations contemplating significant asset acquisitions or construction projects should evaluate how these changes may affect both current-year tax positions and long-term planning strategies.
