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Don't miss out on the important deductions for your business.


Some companies can take advantage of a 9% deduction for US-based business activities.


What is DPAD?

Domestic Production Activities Deduction

Section 199 of the Internal Revenue Code makes US companies more competitive in the global marketplace. This section provides companies making products in the US with a new deduction based upon their manufacturing costs.

At the heart of the deduction is the definition of a "production activity."


So, what defines a "production activity?"

A better look into the term:

  • Manufacturing that's based in the US
  • Selling, leasing, or licensing items that have been manufactured in the US
  • Selling, leasing, or licensing motion pictures that have been produced in the US
  • Construction services in the US, including building and renovation of residential and commercial properties.
  • Engineering and architectural services relating to a US-based construction project.
  • Software development in the US, including development of video games.

Calculation and limitations on the deduction

Your deduction may be very simple, or it could be a complex one.

In its simplest form, the available deduction is 9% of Qualified Production Activities Income (Qualified Production Activities Gross Receipts minus Qualified Production Activities Expenses). Depending upon the size and complexity of the business, this can be a simple calculation or a complex one.

In addition, the deduction is limited to the adjusted gross income (pass-through entities) or taxable income (C-corporations) of the entity and can not exceed 50% of W-2 wages.


Words from just one of our happy clients


"Impressive and responsive service. Acena Consulting successfully steered our client through a state audit of their R&D tax credit. They bring strong technical knowledge backed up with a detailed report providing project-level information. Our client has better and more detailed documentation as a result of Acena's efforts and counsel." -H.P. Tax Partner, Phoenix, AZ


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