October 7, 2025
What the One Big Beautiful Bill Act
Means for Commercial Real Estate
By Reese McFarlane | Associate Broker
The nearly 900-page One Big Beautiful Bill Act (OBBBA) was signed into law earlier this year extending or making permanent many tax provisions from the 2017 Tax Cuts and Jobs Act (TCJA). For commercial real estate investors, developers, and owners, the legislation provides new opportunities to improve cash flow, reduce tax burdens, and increase certainty in long-term planning.
Permanent 100% Bonus Depreciation
One of the bill’s most impactful provisions is the permanent restoration of 100% bonus depreciation for qualifying property placed in service after January 19, 2025.
Under prior law, bonus depreciation was already declining: 2023 allowed 80%, 2024 allowed 60%, and it was scheduled to drop to 40% in 2025 and be phased out completely by 2027. Because OBBBA’s reinstated the 100% bonus depreciation, many components of a building—including roofing, HVAC systems, lighting, and qualified leasehold improvements—can be identified through a cost segregation study and deducted in full immediately. This front-loaded tax benefit significantly improves early cash flow, boosts after-tax returns, and can make otherwise tight deals more attractive.
Expanded Section 179 Expensing
OBBBA also doubles the Section 179 expensing cap for small and mid-size businesses. Effective for assets placed in service in 2025, the maximum immediate write-off under Section 179 increases from about $1.25 million to $2.5 million. Section 179 expensing lets businesses immediately deduct the cost of qualifying equipment, machinery, computers, and certain business property, rather than depreciating over years.
100% Expensing for Manufacturing Facilities
To encourage more U.S.-based manufacturing, OBBBA introduces a 100% depreciation for certain non-residential structures used in manufacturing or production. A new Tax Code §168(n) allows full first-year expensing of “qualified production property,” which covers non-residential real estate that is integral to manufacturing, refining, processing, or agricultural production, if placed in service in the U.S. by January 1, 2031. Eligible facilities must begin construction between January 19, 2025 and January 1, 2029, and cannot be in categories like office, lodging, or parking.
This is a big difference from previous law, where depreciation for commercial buildings still meant 39-year schedules. Now, a qualifying new factory or processing plant can be 100% expensed immediately. For example, a $15 million manufacturing plant built in Maine would have previously been depreciated over decades. If it meets the “qualified production” criteria under OBBBA, the owner could write off nearly the entire $15M in the first year. This incentive could make otherwise marginal industrial projects far more attractive.
Expanded Affordable Housing Incentives
Affordable housing is one of Maine’s most pressing challenges right now, which makes this legislation especially important. The legislation includes several measures designed to address housing affordability:
- Low-Income Housing Tax Credit (LIHTC): State credit allocations are permanently increased by 12%, and the tax-exempt bond financing threshold is reduced from 50% to 25%, making it easier to finance affordable housing projects.
- New Markets Tax Credit (NMTC): The NMTC program, which encourages investment in low-income communities, has been made permanent.
These changes provide additional tools for developers and investors pursuing affordable and workforce housing projects.
Permanent Qualified Opportunity Zones (QOZs)
The 2017 TCJA created Qualified Opportunity Zones (QOZ), which were low-income areas designated for tax-favored investment. OBBBA has made the QOZ program permanent, with new designations scheduled to begin in 2027. The law modifies eligibility requirements, introduces new reporting obligations, and offers enhanced benefits for investments in rural opportunity funds, creating fresh opportunities for capital deployment in underserved areas.
Key changes in the new QOZ regime include:
- Rolling 10-Year Investment Cycles: Instead of a hard cutoff in 2026, there will be QOZ designation rounds every 10 years to refresh eligible areas.
- 5-Year Deferral and Basis Step-Up: Under prior law, all deferred gains would be recognized by December 31, 2026. Now, any gain deferred into a QOZ investment made after 2026 will be taxed on the 5th anniversary of the investment (providing roughly a 5-year deferral). At that five-year point, investors get a 10% step up in basis.
- Removal of 2047 Sunset: Previously, the tax-free appreciation benefit on QOZ investments only applied if the investment was sold by 2047. OBBBA removes that end date, allowing for rolling 30-year periods for the tax-free treatment of long-term (10+ year) QOZ investments. This gives patient investors more flexibility to hold and exit when timing is right, without a looming deadline.
- Stricter Reporting: To address past criticisms, Opportunity Funds must now file annual reports detailing their investments (asset values, project locations, job metrics, etc.), with penalties for non-compliance. This added transparency may give Maine communities and investors better insight into QOZ project impacts.
Key Takeaways
The One Big Beautiful Bill Act represents a major shift in the tax landscape for commercial real estate. From permanent bonus depreciation and QBI deductions to enhanced affordable housing incentives and opportunity zone expansions, the legislation is designed to stimulate investment and provide clarity for long-term planning.
While these changes present new opportunities, they also come with complexities, especially for cross-border investors and projects that may combine multiple incentives. As always, careful structuring and consultation with tax and legal advisors will be critical to fully leverage the benefits.
SOURCES:
https://www.congress.gov/bill/119th-congress/house-bill/1/text
