TRSA Calls on IRS to Include Industrial Laundries in Qualified Property Rules

View TRSA’s Comments to the IRS and U.S. Treasury

TRSA has submitted formal comments to the Internal Revenue Service (IRS) and U.S. Treasury in response to Notice 2026-16, the interim guidance implementing the new 100% special depreciation allowance for “Qualified Production Property” (QPP) under Internal Revenue Code §168(n) which was established by HR-1, the One Big Beautiful Bill Act (OBBBA).

This is critical for the linen, uniform and facility services industry because QPP can allow eligible taxpayers to expense qualifying portions of production facilities – rather than depreciating them over decades – when the property is used as an integral part of a qualified production activity that results in substantial transformation.

“Typically the linen, uniform and facility services industry is looked at as a ‘service industry,’” said Kevin Schwalb, TRSA vice president of government relations. “However, industrial laundries are production facilities, not ‘just laundries,’ and being recognized as such would give TRSA members opportunities to take advantage of tax incentives that will transform the entire industry.”

The interim guidance asks stakeholders for input on whether Treasury’s definitions are representative of industries and requests additional examples showing what does (and does not) meet the “substantial transformation” requirement.

TRSA’s comments make a straightforward point: industrial and commercial laundries are engineered production environments – with controlled wash chemistry, validated temperature/time profiles and industrial finishing systems – that convert textiles from an unmarketable or functionally impaired condition into hygienically clean, functional textiles marketable for their intended end-use (often under a rental/lease model). This process should fall under the definition of significant transformation.

The TRSA comments ask the Treasury Department to:

1) Add a Clear Example for Industrial Laundering/Sanitization

TRSA requests that Treasury and the IRS add a notice-style example confirming that industrial laundering and hygienic processing of reusable textiles can satisfy substantial transformation – particularly where the process changes the textile’s condition and functional characteristics and returns it to a marketable state for its intended market.

This matters because many notice examples naturally track “raw material to new article” manufacturing, while industrial laundering often involves transforming condition/state and marketability rather than changing the physical identity of an item (e.g., the textile remains a textile). TRSA’s submission urges the U.S. Treasury to avoid a narrow reading that unintentionally excludes industrial hygienic-processing industries.

2) Confirm Rental/Lease Models Don’t Undercut the Analysis

Notice 2026-16’s manufacturing definition explicitly contemplates property created and held for rent/lease (not only sale), which aligns with industrial laundry business models. TRSA asks Treasury to reinforce this point to prevent confusion in real-world application.

TRSA’s submission gives Treasury and the IRS a workable path to ensure the new QPP incentive functions as Congress intended – by recognizing that industrial textile laundering is an engineered, industrial process that transforms textiles into marketable, hygienically clean outputs and by clarifying what it is not.