Asphalt Terminals: New Tax Law Creates Unprecedented Opportunity

If you are considering building a terminal to provide for your liquid asphalt needs, there has never been a better time to act.

The passage of the "One Big Beautiful Bill" (OBBB) on July 4th of this year has created an unprecedented financial opportunity, effectively "begging" you to get on with it.

Here's the simple reason: The OBBB introduces massive new tax incentives. For terminals that manufacture, produce, or refine asphalt (e.g., polymer-modified asphalt, emulsions, or custom blends), you can potentially write off 100% of both the equipment and the building for federal taxes. For storage-only terminals, the equipment still qualifies for 100% bonus depreciation, even if the building itself does not.

What the OBBB Changes for You

The new law introduces two game-changing provisions:

1. Permanent 100% Bonus Depreciation for Equipment

The OBBB permanently restores 100% bonus depreciation for qualified property. This allows you to expense all your machinery, tanks, piping, lab gear, controls, computers, etc., in the first year they are placed in service.

2. A New 100% Write-Off for Manufacturing Buildings

The bill adds a new category called "Qualified Production Property" (QPP). This lets you expense 100% of eligible nonresidential real property (i.e., the building itself) if it's used in manufacturing, production, or refining.

To qualify: Construction must begin after Dec. 31, 2024, and the property must be placed in service before Jan. 1, 2034.

The Key Question: Will Your Terminal Building Qualify?

This new 100% building write-off depends on one crucial factor: what your terminal does.

Why This Matters: The Financial Impact

Let's put this in perspective with a real-world example:

Scenario A: Manufacturing Terminal (QPP)

If your terminal qualifies as QPP (produces PMA, emulsions, or custom blends), you can write off the entire $25 million in Year 1. At a 21% corporate tax rate, that's a potential tax savings of $5.25 million in the first year.

Scenario B: Storage-Only Terminal

If your terminal is storage-only, you can still write off the $20 million in equipment immediately (saving $4.2 million in Year 1 taxes), but the building would depreciate over 39 years under normal rules.

The Strategic Implications

This tax law creates several strategic opportunities:

1. Accelerated ROI

The immediate tax savings dramatically improve your return on investment. Instead of waiting decades to recover depreciation benefits, you get them all upfront, improving cash flow when you need it most.

2. Competitive Advantage

Terminals that can produce modified asphalts or emulsions have always had operational advantages. Now they have massive tax advantages too. This could be the tipping point that makes manufacturing capabilities essential rather than optional.

3. Time Sensitivity

The window is limited. Construction must begin after Dec. 31, 2024, and the property must be placed in service before Jan. 1, 2034. For a major terminal project, that timeline matters. Starting planning now could mean the difference between qualifying and missing out.

4. Design Decisions Matter

If you're on the fence about adding manufacturing capabilities, the tax benefits might tip the scales. The incremental cost of adding PMA or emulsion production equipment could be largely offset by the ability to write off the entire building.

Important Considerations

Documentation Is Critical

To claim QPP status, you'll need to demonstrate that your facility is genuinely used for manufacturing or production. This means:

• Clear documentation of your production processes
• Evidence that you're materially transforming the product
• Proper allocation of space between production and storage functions
• Compliance with all relevant regulations and standards

State Tax Implications

While the OBBB is federal law, state tax treatment may vary. Some states conform to federal bonus depreciation rules, others don't. You'll need to consider both federal and state tax impacts in your analysis.

Alternative Minimum Tax (AMT)

For corporations subject to AMT, the benefits may be different. Consult with your tax advisor to understand how these rules apply to your specific situation.

The Bottom Line

The OBBB has fundamentally changed the economics of building asphalt terminals. The combination of permanent 100% bonus depreciation for equipment and the new QPP category for manufacturing buildings creates an unprecedented opportunity for companies considering terminal investments.

For manufacturing terminals, the tax benefits are extraordinary. For storage-only terminals, the equipment depreciation alone is still highly valuable. Either way, the financial case for building a terminal has never been stronger.

But the window won't stay open forever. With construction needing to begin after Dec. 31, 2024, and completion required before Jan. 1, 2034, the time to start planning is now.

Next Steps

If you're considering a terminal investment, here's what you should do:

1. Consult with your tax advisor to understand how these rules apply to your specific situation
2. Evaluate your operational needs - storage only, or manufacturing capabilities?
3. Run the numbers with the new tax benefits included
4. Consider the timeline - can you realistically complete the project within the qualifying window?
5. Plan for documentation to support your tax position

At Asphalt Unlimited, we've been helping companies navigate the complexities of asphalt supply, pricing, and now, the financial opportunities created by new tax laws. The OBBB represents a once-in-a-generation opportunity for companies with the vision to act.

The question isn't whether this is a good opportunity. It clearly is. The question is whether you're positioned to take advantage of it.