Can a taxpayer claim Section 179 expensing or bonus depreciation for a metal steel building that is not a conventional stick-built structure?
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A taxpayer’s ability to claim Section 179 expensing or bonus depreciation for a metal steel building that is not a conventional stick-built structure depends on how the building is classified for tax purposes—specifically, whether it is considered “tangible personal property” (§ 1245 property) or “real property” (§ 1250 property), and whether it meets the requirements for Section 179 or bonus depreciation under the Internal Revenue Code and Treasury Regulations.
1. Section 179 Expensing
General Rule:Section 179 allows a taxpayer to expense the cost of qualifying property placed in service during the tax year, subject to annual limits and other requirements. To qualify, the property must be:- Tangible property to which Section 168 applies,- Section 1245 property (generally, tangible personal property), or- At the taxpayer’s election, certain qualified real property (such as qualified improvement property and certain improvements to nonresidential real property).
Buildings and Structural Components:A building or its structural components is generally not considered Section 1245 property, but rather Section 1250 property (real property). Section 179 does not apply to buildings or their structural components, except for certain qualified real property (e.g., qualified improvement property, roofs, HVAC, fire protection, and security systems for nonresidential real property).
Metal Steel Buildings:- If the metal steel building is a permanent structure affixed to land and used as a building (e.g., warehouse, storage, manufacturing facility), it is generally considered real property (§ 1250 property), not tangible personal property (§ 1245 property).- As such, the building itself would not qualify for Section 179 expensing, unless it is qualified improvement property or one of the specific improvements to nonresidential real property listed in Section 179(e) (e.g., roofs, HVAC, fire protection, security systems).
Exceptions:- If the metal building is not a permanent structure and is instead a prefabricated, movable structure (such as a kiosk, temporary shelter, or equipment housing that is not affixed to the land and is not intended to be permanent), it may be considered tangible personal property (§ 1245 property) and could qualify for Section 179 expensing.- The determination is fact-specific and depends on the building’s intended use, method of attachment, and whether it is inherently permanent (see the “Whiteco factors” and IRS guidance).
2. Bonus Depreciation (Section 168(k))
General Rule:Bonus depreciation under Section 168(k) is available for “qualified property,” which includes:- MACRS property with a recovery period of 20 years or less,- Computer software,- Water utility property,- Qualified improvement property,- Certain other specified property.
Buildings:- Buildings (including metal steel buildings) are generally nonresidential real property (39-year recovery period) or residential rental property (27.5-year recovery period), both of which have recovery periods longer than 20 years and are not eligible for bonus depreciation.- However, certain components or improvements to the building (e.g., qualified improvement property, roofs, HVAC, fire protection, security systems) may have a shorter recovery period and could be eligible for bonus depreciation if they meet the requirements.
Movable/Non-Permanent Structures:- If the metal steel building is not a permanent structure and is classified as tangible personal property (e.g., a movable storage unit, equipment shelter, or similar), and has a recovery period of 20 years or less, it may qualify for bonus depreciation.
Cost Segregation:- Taxpayers may use a cost segregation study to identify and allocate costs of certain components of a building (such as electrical, HVAC, or specialty structures) that may qualify as tangible personal property and thus be eligible for bonus depreciation or Section 179 expensing, even if the building as a whole does not.
3. Legal Standards for Classification
Inherently Permanent Test:- The IRS and courts use the “inherently permanent” test (see Whiteco Industries, Inc. v. Commissioner, 65 T.C. 664 (1975)) to determine whether a structure is real property or tangible personal property. Factors include whether the property is designed to remain permanently in place, the manner of affixation, and the intent of the taxpayer.- If the metal steel building is designed to be permanent, affixed to a foundation, and used as a building, it is real property and not eligible for Section 179 or bonus depreciation as a whole.
Temporary/Movable Structures:- If the building is not permanent, is easily movable, and is not intended to remain in place indefinitely, it may be classified as tangible personal property and could be eligible for Section 179 and bonus depreciation.
4. Summary Table
5. Conclusion
A taxpayer generally cannot claim Section 179 expensing or bonus depreciation for a metal steel building that is a permanent structure (i.e., a building or its structural components), except for certain qualified improvements or components. However, if the metal steel building is not a permanent structure and is classified as tangible personal property, it may be eligible for Section 179 expensing and bonus depreciation, provided it meets all other requirements. The classification depends on the facts and circumstances, including the building’s intended use, method of attachment, and permanence. Cost segregation studies may help identify eligible components within a larger building project.
If you have a specific type of metal building or use case in mind, or if you are considering certain improvements or components, please provide more details for a more tailored analysis.
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