What a study looks at in a plant
The dividing line is function: does it serve the production process or the building?
| Component | How it is analyzed |
|---|---|
| Equipment foundations, pits and supports | Built for specific machinery rather than the building; analyzed with the equipment they carry. |
| Process electrical: dedicated feeders, panels, bus duct to machines | Allocated by what the circuits serve. General lighting and building power stay structural. |
| Process piping, compressed air, process water and exhaust | Systems that serve production equipment, separated from building plumbing and HVAC. |
| HVAC for clean rooms or process temperature and humidity | Moves out of the building only when its sole justification is the process or equipment; comfort conditioning stays. |
| Paving, truck courts, rail spurs, fencing, site lighting | Land improvements, generally 15-year. |
| The production portion of a new building | Possibly qualified production property under §168(n): an elective 100% deduction for qualifying new construction. |
Pairing it with the R&D credit
Process engineering, tooling development and first-article runs are often qualified research under IRC §41. The building and the equipment are not: depreciable property is excluded from qualified supplies, and its cost is not a §174 research expenditure. Run on the same facts, the two studies capture both benefits without either touching the other’s costs.
See the R&D credit for manufacturers, §174A expensing, and both studies on one facility.
State tax, again
Many manufacturing states do not follow federal bonus depreciation. Pennsylvania, for example, requires an add-back for corporate net income tax purposes. The study’s asset schedule carries the class and placed-in-service detail your preparer needs to keep the state schedule.
Questions manufacturers ask
Can the same cost count for the R&D credit and the building study?
Is §168(n) qualified production property available for an existing plant?
We expanded the plant last year. Is that a study on its own?
Primary sources
What this page relies on, as reviewed October 2, 2026.
- IRS Notice 2026-16, qualified production property (§168(n))
- IRS Pub 5653, Cost Segregation Audit Techniques Guide (rev. 2-2025)
- 26 U.S.C. §168, accelerated cost recovery system (Cornell LII)
- Bloomberg Tax, state conformity to federal bonus depreciation (secondary)
- Cost Seg Smart, 2026 reclassification benchmarks (vendor-reported)
Tax law, IRS guidance and state conformity change. Confirm the current rules and how they apply to your property with a qualified professional before acting.