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Domestic Production Activities Deduction
As the Domestic Production Activities Deduction continues to increase, providing enhanced opportunities to save, it may be time for you to take a closer look at the potential savings DPAD can offer.

Domestic Production Activities Deduction

Domestic Production Activities Deduction (DPAD) means tax savings opportunities

During these difficult economic times, manufacturers face even greater challenges. Finding new ways to save is vital to continued success. One tax saving opportunity for companies with U.S.-based manufacturing is the Domestic Production Activities Deduction (DPAD). Also called the Section 199 Deduction, DPAD deductions doubled to 6 percent of qualified income in 2007 and will again increase in 2010 to 9 percent.

DPAD chartOur manufacturing tax specialists have years of experience working with manufacturers who produce everything from medical devices to auto parts. We help them analyze, calculate, and manage DPAD deductions. Put our team of experts to work, and see what they can do for you. 

DPAD Calculations are complex

The experts at Plante Moran understand that DPAD calculations are complex, especially when you have multiple lines of business. For each line, the Qualified Production Activities Income (QPAI) must be calculated, as well as the Qualified Production Activities Expenses (QPAE), including sales and general and administrative expenses.

The DPAD will be maximized to the extent that high gross margin qualifying activities and low gross margin non-qualifying activities can be identified. 

We will walk you through the process

We hope you will appreciate our sophisticated tax, financial analysis, and cost accounting skills as we help you define qualified and nonqualified revenue streams, walk you through the relevant Section 861 regulations, and help you decide which of three W-2 limitations is most beneficial.

One of our clients who took advantage of the DPAD deduction had a complicated mix of products; some the company produced and some the company purchased. All were delivered through the client’s distribution system.

After close study, the Plante Moran team found that the company qualified to receive DPAD on 93 percent of its taxable income even though only 83 percent of its gross receipts qualified as domestic production activities. And the systematic review and analysis we provided will minimize their audit risk.

Put the Plante Moran manufacturing team to work, and we will show you how to minimize your taxes and maximize your profitability. DPAD is another way Plante & Moran tax specialists help manufacturers.

“Plante & Moran has assisted us with a multitude of services, from auditing to manufacturing consulting to strategic planning to family and estate planning. Regardless of our needs, they bring a level of intelligence to every situation; they’re consummate professionals.

In the role of manufacturing consulting, they’ve served as consultants to our board of directors. In addition, we’ve participated in several benchmarking studies conducted by both Plante & Moran and the Precision Metalforming Association; those studies have been extremely helpful, not only in terms of benchmarking the Su-Dan Company but also in helping us fulfill our QS and TS certification requirements.”

Dennis Keat
The Su-Dan Company