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199 DPAD

IRC Section 199 Domestic Production Activities Deductions (DPAD) represents a valuable tax incentive for businesses that perform domestic architecture, engineering, and construction services.  Eligible engineering and architecture services include consultation, investigation, evaluation, planning, design and supervision of construction. Construction activities must be domestic and can include residential or commercial building improvements as well as infrastructure projects. Generally, the tax deduction can be as much as 9% of taxable income.

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R&D for Manufacturing

  • Product Design & Testing
  • First-Article Runs
  • CNC Programming
  • Tooling Development

Manufacturing Firm Case Study

ItemAverage Annual Amount
Gross Revenues$15,000,000
Total Payroll$5,600,000
Qualified Research Expenses (QREs)$1,100,000
Net Federal Credits$72,000
Net State Credits$12,000
Total Net Federal and State Credits$84,000

Many owners, officers, and CPAs of manufacturing companies are unaware that they are eligible for valuable federal and state Research & Development (R&D) Tax Credits. However, due to the expansive definition of R&D for tax credit purposes, many of the product development and process improvement activities performed by manufacturing companies often qualify for such treatment. 

Examples of Qualified Activities

  • Equipment Development
  • Process Design & Development
  • Quality Assurance 

Other Incentives