Notice 2007-36

Where this comes from

In August 2005, Hurricanes Katrina, Rita, and Wilma caused widespread destruction along the Gulf Coast. Congress responded with a series of tax relief measures. One of them was the Gulf Opportunity Zone Act of 2005, which created the GO Zone.

Section 1400N(d) of the tax code provided a 50% additional first-year depreciation allowance for qualified property placed in service in the GO Zone. The IRS issued Notice 2007-36 in April 2007 to address questions that had come up about how the rule applied.

What it established

The notice addressed two main issues. First, it clarified the original-use requirement. Property must have been placed in service in original-use in the GO Zone. Acquired used property did not qualify under the same rules as new property.

Second, it addressed placed-in-service rules for property constructed inside or outside the zone. Property manufactured or produced outside the GO Zone but used inside it faced different tests than property constructed within the zone boundaries. The notice gave guidance on how to trace the property to the zone for purposes of the bonus.

The structure of Section 1400N(d) closely paralleled Section 168(k). This parallel design means the placed-in-service and original-use mechanics are similar, and case law and guidance under 168(k) often informs how the GO Zone rules are applied.

How it shows up in a study

For cost segregation studies on property placed in service in Louisiana, Mississippi, or Alabama during the GO Zone window, this notice is part of the governing authority. The study identifies the short-life components, and the bonus applies under Section 1400N(d) rather than the general 168(k) rules.

The notice also appears in the Stine LLC context. Stine LLC v. United States is one of the few GO Zone bonus depreciation cases that reached litigation, and the original-use and placed-in-service issues addressed in this notice were directly relevant to that dispute.

What it does not mean

The GO Zone bonus was specific to the designated disaster area. Outside that area, the general Section 168(k) rules applied. Notice 2007-36 is narrow in geographic scope.

The notice is also guidance, not binding regulation. It sets out the IRS's position on the original-use and placed-in-service rules, but it is not a Treasury regulation with the full force of law. For most studies, the notice provides useful confirmation of the mechanics without being the primary authority.