Manufacturing has long been considered the backbone of our
country's industry. It is vital to a country's prosperity,
in part because most manufacturing endeavors support a number of
related manufacturing, service and other industries as well.
Congress recognizes the value of manufacturing, and has long known
that favorable tax rules can effectively encourage and reward
certain activities and behavior. The purpose of this article is to
describe one such tax break that was designed primarily for
manufacturers: The Domestic Production Activities Deduction. It is
a very potent benefit that indirectly allows certain outlays to be
deducted twice.
HISTORY
The Domestic Production Activities Deduction ("DPAD")
was introduced in 2004 with the creation of Internal Revenue Code
Section 199. While it was established to encourage manufacturing,
its history is a little more complex than that. Since the early
1970s a number of tax benefits were rolled out in succession, each
one
