How Manufacturers Can Model the Tax and Cash Impact of Facility Expansions

A major incentive in the One Big Beautiful Bill Act is changing the game for manufacturers considering new or expanded production facilities. Instead of depreciating building investments over 39 years, qualifying manufacturers can now deduct the full cost immediately.

This opportunity is substantial, but it also raises important questions about timing, cash flow, and strategic planning.

The Immediate Tax Benefit

Traditionally, a $4.6 million facility expansion would be depreciated over decades. With the new provisions, that same investment could generate a $1.6 million tax benefit at a typical blended tax rate.

Tip: It’s not just about the deduction itself, it’s about understanding when and how that benefit affects your bottom line.

Timing Is Everything

One misconception is that a large deduction equals an immediate cash refund. In reality, the benefit may need to offset other taxable income over time.

Key questions to consider:

Do you have enough taxable income to use the deduction now?
Will borrowing be necessary to fund the expansion?
How does the loan term, 10 years versus 20 years, affect cash flow and tax distributions?

By modeling these factors in advance, businesses can make informed decisions and avoid surprises.

Modeling Scenarios With Tools Like Fathom

At Chortek, we use Fathom to help manufacturing clients:

Align assumptions and visualize impact over time
Compare scenarios such as no expansion, book depreciation, or immediate bonus depreciation
Track cash flow, loan repayment, and tax distributions

For example, borrowing $4.6 million for a building expansion can look very different depending on the loan term and timing of the tax benefit. Modeling allows businesses to see:

When the tax deduction actually reduces cash needs
How long it takes before distributions are needed to cover taxable income
The projected cash position over several years

Comparing Key Scenarios

By modeling different options, manufacturers can see the difference between:

Keeping the current facility
Depreciating the expansion over time for book purposes
Taking immediate bonus depreciation for tax purposes

This helps businesses plan for:

Cash availability for operations
Strategic reinvestment in equipment or materials
Tax planning for shareholders

Why This Matters

Immediate depreciation is powerful, but it requires careful planning. Modeling different scenarios ensures that manufacturers:

Optimize the timing of tax benefits
Understand the cash flow implications of borrowing
Make confident, data-driven decisions

Bottom Line

Modeling the tax and cash impact of a facility expansion is more than a finance exercise. It is a strategic planning tool. Platforms like Fathom help manufacturers model different scenarios, understand cash flow timing, maximize incentives like bonus depreciation, and make investment decisions with confidence.

If this article is helpful, share it with your team or network. To learn more about how forecasting can support your capital investment strategy, reach out to the team at Chortek.