Revitalizing U.S. manufacturing: Tax law’s QPP could fuel industrial growth

In an era defined by global uncertainty, supply chain disruption and intensifying competition, American manufacturers face a pivotal moment. The passage of the 2025 One Big Beautiful Bill Act (OBBBA) signals a bold shift in U.S. industrial policy and directly addresses the capital constraints and strategic hesitations hindering domestic reinvestment. A key element of this legislation for manufacturers is the qualified production property (QPP) provision, a powerful new incentive designed to lower the after-tax cost of capital for industrial investments and unlock a new wave of modernization.

With tariffs raising the cost of foreign products, companies looking to shift production to the United States will welcome the QPP provision, given the potential for domestic production facilities to be fully deductible. Still, for some companies, outsourcing production in the current tariff environment remains more cost-efficient than onshoring production (even if the capital investment in a domestic facility is fully deductible for tax).

For manufacturers navigating tight margins, aging infrastructure and evolving geopolitical pressures, the QPP provision offers more than just tax relief; it provides a strategic lever to retool operations and accelerate growth. As the manufacturing sector stands at the threshold of transformation, understanding and acting on the QPP could be a competitive differentiator in the next industrial era.

What is the QPP provision and why does it matter?

The QPP provision—a landmark tax incentive aimed at revitalizing domestic manufacturing—establishes nonresidential real property used in qualifying production activities as a newly defined asset class. Under prior law, the cost of nonresidential real property was generally depreciated over a 39-year period. The new QPP provision provides for accelerated expensing of capital investments in qualifying production assets.

To qualify, assets must do all of the following:

• Begin construction between Jan. 1, 2025, and Dec. 31, 2028.
• Be placed in service before Jan. 1, 2031.
• Meet specific criteria related to domestic use and production.

The QPP provision complements existing incentives such as bonus depreciation, section 179 expensing, and research and development tax credits, but goes further by targeting long-term industrial competitiveness through the inclusion of nonresidential real property.

Unlike prior incentives that were often limited in scope, the QPP provision is designed to catalyze sustained investment in the physical backbone of American industry by reducing the after-tax cost of capital-intensive projects, making it easier for manufacturers to justify large-scale investments.

Economic impact: Unlocking a new investment cycle

The most immediate impact of the QPP provision is a reduction in after-tax cost of capital. For example, a manufacturer investing $50 million in a new facility could see tax savings of $10 million to $15 million in the first year of placing the asset in service, depending on its effective tax rate, operating results and financing structure. These savings improve project economics, making previously deferred or downsized projects financially viable.

This incentive has the potential to unlock a wave of capital investment across the industrial products industry. Companies that had postponed expansion or modernization due to cost concerns now have a compelling reason to act. For companies considering shifting production back to the United States due to the current tariff environment, conducting a cost-benefit analysis that factors in the potential tax savings from new facility investments will be helpful. 

Further, the QPP provision aligns with broader U.S. macroeconomic goals by supporting reshoring and nearshoring strategies, making domestic production more cost-competitive. It also enhances supply chain resilience by encouraging domestic production capacity and reducing dependence on volatile global logistics networks.

Strategic implications for manufacturers

For manufacturers, the QPP provision represents a strategic opportunity with numerous implications, including:

• Modernization of legacy infrastructure: Aging plants and outdated production facilities can now be replaced, expanded or repurposed to improve efficiency, safety and sustainability.
• Financing of megaprojects: Large-scale capital projects, including greenfield facilities and manufacturing hubs, are more financially attractive.
• Improved return on investment for private equity groups: The QPP provision enhances the investment thesis for industrial portfolio companies by reducing after-tax capital costs while boosting asset productivity and long-term value.

Aligning capital planning with QPP provision timelines, conducting cost segregation studies to maximize eligible assets, and navigating complex compliance requirements will be critical to capitalizing on the potential benefits of this new provision.

Challenges and considerations

While the QPP provision presents a compelling opportunity for U.S. manufacturers, it also introduces new challenges:

• Tight construction and service timelines: With a five-year window for eligibility, companies will need to move swiftly to plan, finance and execute projects.
• Complex compliance and documentation: Detailed records are required to substantiate QPP eligibility, including asset classification, usage documentation and potentially third-party validation.
• Cost of reshoring vs. nearshoring: While the QPP provision favors domestic investment, companies must still weigh the cost and feasibility of reshoring operations versus pursuing nondomestic alternatives, especially given the tariff landscape in 2025. In some cases, it may still be more cost-efficient to source or manufacture products abroad.

The road ahead

The QPP provision represents an opportunity for U.S. manufacturers to reinvest, retool and reposition themselves for a more competitive future. For the industrial industry, QPP is more than a line item in the tax code; it’s a rare financial lever that can transform the economics of industrial investment by lowering the after-tax cost of capital.

As manufacturers evaluate their capital plans, supply chain strategies and long-term growth goals, they should consider the impact of the QPP provision in unlocking tax savings, accelerating modernization and strengthening operational resilience.