/>iThe following post discusses legal and financial matters and is provided for general informational purposes only. It is not intended to serve as legal or financial advice, particularly with respect to an individual entity’s tax status. Readers should consult qualified legal, accounting, and tax planning professionals for advice as to their specific circumstances.
On July 4, 2025, President Donald Trump signed the One Big Beautiful Bill Act (OBBBA), a massive budget reconciliation bill that codified many of the Trump Administration’s tax and spending policy objectives. While the final version of the Act did not exclude broadband grants from treatment as gross income for purposes of federal taxation (as proposed under the Broadband Grant Tax Treatment Act re-introduced earlier this year), the OBBBA’s 100% bonus depreciation provision provides some consolation, as it promises to significantly benefit some broadband network owners.
In general, depreciation provides a tax deduction equivalent to the purchase price of the property, normally realized over the economic life of the property. Bonus depreciation enables the tax deduction to occur on an accelerated basis and is intended to incentivize capital investments by businesses. First enacted in 2002, some form of bonus depreciation has been in effect for most of the past two decades. The percentage rate of bonus depreciation, and property eligible for it, has changed under various legislative enactments over that period.
The 2017 Tax Cuts and Jobs Act established a 100% bonus depreciation rate (meaning a business may be able to deduct all of a qualifying asset’s cost in the year that asset was acquired) for assets acquired and placed in service between September 27, 2017 and January 1, 2023, but would have phased down the bonus depreciation rate to zero percent in 2027. The OBBBA, however, now provides a permanent 100% bonus depreciation provision of eligible assets acquired and placed into service after January 19, 2025.
What does this mean for fiber optic networks and other Telephone Distribution Plant (including conduit and related outside plant and equipment (OSP))? AT&T and others in the industry are very bullish on it, touting bonus depreciation as enabling, in AT&T’s case, “over $1 billion annually in cash-tax deferrals, effectively reducing the cost of capital for fiber projects.”
But fiber network owners should note that bonus depreciation may or may not be available to them, depending on what accounting methods they follow.
Bonus depreciation is available only for assets with a recovery period of 20 years or less under the Modified Accelerated Cost Recovery System (MACRS). Fiber optic networks and other OSP, however, generally have a long economic life: the IRS lists the “class life” of Telephone Distribution Plant as 24 years, which is also the recovery period for depreciation of Telephone Distribution Plant under the Alternative Depreciation System.
At first glance, the 24-year class life of telecommunications OSP would suggest that fiber optic networks simply are not eligible for bonus depreciation. But that is not the case, as is evident from the reaction of AT&T and others.
The key is that bonus depreciation eligibility depends on the recovery period of the asset, not its class life. Under the Alternative Depreciation System (ADS), the recovery period of Telephone Distribution Plant is 24 years. But under the General Depreciation System (GDS), the recovery period is 15 years.
In the most general terms, then, eligibility of fiber optic network assets for bonus depreciation depends on the provider’s chosen accounting and depreciation methods.
We must emphasize that the above is a greatly simplified explanation, and there is considerable nuance in the tax treatment of capital assets. As noted in the introduction, readers should consult with their own legal, financial, and tax professionals with respect to their particular circumstances.
