It could be time for you to take a closer look at IRC Sec. 199!
The Domestic Production Activities Deduction (DPAD), also called the Section 199 Deduction, offers companies with manufacturing based in the United States a chance for a significant manufacturing tax credit. The deduction is now 9 percent of qualified income. With the richness of the Section 199 deduction and increased scrutiny by the IRS, consider turning to our manufacturing tax specialists who will use their expertise to help you analyze, calculate, and manage your DPAD deduction.
DPAD Calculations are complex
When you have multiple lines of business, this can be complex. For each line, 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 domestic production activities deduction will be maximized to the extent that high gross margin qualifying activities and low gross margin non-qualifying activities can be identified.
Systematic review and analysis
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 W2 limitations is most beneficial when obtaining a manufacturing tax credit.
One of our clients who took advantage of the DPAD, or Section 199 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 a 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.