For more than a decade the IRS has provided this unique deduction for production activities related to goods produced in the U.S. and exported for sale. A DPAD claim requires appropriate documentation and allocation of costs, establishing processes to document activities, and coordination with other tax considerations such as IC-DISC and Foreign Tax Credits.


Introduced in 2005, DPAD offers direct tax breaks for qualifying production activities. The credit covers a wide range of production activities but must be fully tracked in the corporation’s accounting. Most instances will require a cost accounting methodology.

Under IRS §199, qualified production activities may include:

  • U.S. based manufacturing
  • U.S. based construction services including building and renovation of residential and commercial properties
  • Engineering and architectural activities for U.S. based construction projects
  • U.S. based software development
  • Video game development
  • Selling, leasing, or licensing items manufactured in the U.S.

The qualification process includes identifying all sources of Domestic Production Gross Receipts (DPGR) and identifying non-qualified deductions, then allocating and apportioning the deductions to calculate the Qualified Production Activities income (QPAI).

It should be noted that a DPAD claim must be coordinated with associated claims for IC-DISC and Foreign Tax Credits.