Editor’s Note: Bill Bosco submitted an amended version of this article, which was published on Aug. 27, 2025.
New depreciation rules in the latest tax legislation are expected to reshape equipment and real estate leasing strategies, creating both opportunities and compliance risks for lessors.
I expect that the One Big Beautiful Bill will be a boon to the equipment finance and leasing industry. Besides the obvious benefits of 100% MACRCS write-offs, other provisions should spur the economy as well, and economic growth means increased CAPEX. Somebody’s got to finance that. Why not you?
What’s in the new tax bill?
The following excerpt regarding key depreciation rules in the new Tax Bill was published in a Norton Rose Fulbright analysis of the new tax bill. For the complete analysis, go to the Norton Rose Fulbright website:
“The bill will also accelerate depreciation for many factory owners. The part of a factory that is a building must normally be depreciated currently over 39 years on a straight-line basis. Not all structures are buildings for tax purposes. A structure that is merely a shell for the equipment it covers is treated as part of the equipment.
The bill allows the cost of the part of any new factory or improvement to an existing factory that is a building to be deducted immediately. Construction must begin for tax purposes after January 19, 2025, and by the end of calendar year 2028. The work must be placed in service after July 4, 2025, and by the end of calendar year 2030. The IRS can extend the 2030 deadline if an “act of God” prevents the work from being placed in service in time.
There must be a substantial transformation inside the factory of raw materials and components into a different product. The product must be equipment or other “tangible personal property.” It cannot be a food or beverage if those items are sold at retail in the same building.
Any taxpayer acquiring an existing factory after January 19, 2025, through the end of calendar year 2028 may also deduct the cost immediately. However, the transaction would have to check three boxes that are in the new statute.
The bonus cannot be claimed on the parts of the building that are used for office space, sales or research activities, software development, engineering services, parking and other functions unrelated to actual manufacturing, production or refining.
The factory owner will have to repay any depreciation bonus claimed to the US Treasury if the factory stops being used in a qualified manner at any time during the next 10 years after it is put in service. A sale to a new owner will not trigger recapture as long as the new owner continues to use the factory in a qualifying manner.[1]
I also followed the news and got some bad news when I read the text of the final bill that passed Congress as of July 9, 2025. In the section regarding immediate expensing of factories, the bill limits the benefit to users of the asset – not lessors. This means a lessor cannot take the immediate tax write-off in a new/used asset lease or a sale-leaseback. This is the section of text of the final bill: “For purposes of clause (ii), in the case of property with respect to which the taxpayer is a lessor, property used by a lessee shall not be considered to be used by the taxpayer as part of a qualified production activity.”
What are the implications and action items?
CFOs should begin working with their lessors and auditors before committing to any equipment asset acquisition. If they “control” the asset before leasing it, it becomes a sale-leaseback. The sale-leaseback rules in ASC 842 are complex, and accounting for a failed sale-leaseback can result in adverse financial reporting outcomes.
Lessors should alert their customers and prospects to the opportunities and risks. It’s best to start working on projects together in advance of ordering assets or committing to the acquisition of assets that require construction, such as planes or buildings. In my corporate life at a bank-owned leasing company, I would issue “you should know” bulletins to customers and my bank relationship managers to prospect for new deals. It’s a good marketing practice to get “share of mind” with customers by alerting them to rule changes that impact their business.
Equipment lessors should prepare to do real estate leases, both synthetic and leases for factories to-be-acquired or built as the capitalized amount will be less than 30% of the cost of the factory – much better than a loan. Sadly, true leases. of factories do not transfer the immediate write-off to lessors, so a true lease financing is not viable. There should be a strong demand for building financing, and this may be a new synthetic product area for many lessors. Sale leaseback rules do not allow sale treatment if they contain a purchase option. Consider proposing synthetic finance leases of to-be-acquired or built factories for your EBITDA customers because they provide 100% financing, which capitalizes at less than loan financing. Think about it. Start your homework now.
Lessors also need to have solutions for all types of customers, including both EBITDA customers and those who favor EPS, , as well as IFRS customers. The incentives in the bill are designed to bring manufacturing into the U.S., so lessors will be selling to more IFRS customers’ U.S. subsidiaries.
Where to Go for the Solutions
For a complete understanding of the tax bill, work with a law firm that specializes in structured transactions. Also read the Big 4 lease guides to understand the build-to-suit rules (especially for real estate leases) and the sale-leaseback rules.
The Leasing 101 website provides links to law firms and the Big 4 lease guides. I also offer a leasing sales training product that provides comprehensive details on structuring to meet the tax and financial reporting objectives of customers.
About the Author:
Bill Bosco is the President/CEO of Leasing 101, a lease training consulting company. Bill has over 50 years’ experience in the leasing industry. His areas of expertise are accounting, tax, financial analysis, sales, structuring, and training. He served on the EFLA accounting committee for 30 years, including 10 years as chairman. He is a frequent author and speaker on leasing topics. He has won awards from the Monitor and ELFA. He can be reached at wbleasing101@aol.com. Visit https://leasing-101.net/about/
[1] Martin, Keith, et. al., “Effects Of “One Big Beautiful Bill” On Projects,” Norton Rose Fulbright, July 7, 2025.
