Domestic Production Activities Deduction

By Kenneth H. Bridges, CPA, PFS     July 2015

Many of our clients see on their tax returns a “domestic production activities deduction” and wonder what this is.  This deduction, enacted in 2004, was designed to replace the exclusion for “extraterritorial income” which was repealed after being found by the World Trade Organization to be an illegal subsidy to U.S. exporters.  This deduction, however, is much broader and applies to net income from U.S. manufacturing, production, growth, extraction, film production, construction, software development, and architectural and engineering services.  The deduction, subject to some limitations, is generally equal to 9% of the net income from such activities.

Kenneth H. Bridges, CPA, PFS is a partner with Bridges & Dunn-Rankin, LLP an Atlanta-based CPA firm.

This article is presented for educational and informational purposes only, and is not intended to constitute legal, tax or accounting advice.  The article provides only a very general summary of complex rules.  For advice on how these rules may apply to your specific situation, contact a professional tax advisor.