With section 199 repealed for tax years beginning after 12/31/17, now is the time for a final review of domestic production activity deductions (“DPAD”).  A properly conducted review will optimize 2017 DPAD and identify refund opportunities in prior tax years.

With internal resources likely committed to 2017 compliance and implementation of the Tax Cuts and Jobs Act, chief tax officers should consider success-based-fee DPAD reviews for years prior to 2017.  

A properly conducted review will consider all the primary areas that impact DPAD optimization, including the broad definitions of manufacturing and construction; software production; COGS allocation rather than apportionment; beneficial methodologies under the “section 861 method”; and the full scope of prior period cost allocation.  The review also should consider whether unique events (for example, a 2017 deemed repatriation) will utilize net operating loss carry forwards, impact expense allocation and apportionment, or otherwise prevent the taxpayer from being “taxable income limited.”

A timely review of section 199 opportunities is likely to produce meaningful cash and EPS.

Have a question? Contact John Manning. Your comments are always welcome!