Qualified Production Activities Income (QPAI)

Qualified Production Activities Income (QPAI)

What is ‘Qualified Production Activities Income – QPAI’

Income derived from domestic production that qualifies for reduced taxation. More specifically, qualified production activities income is the difference between the manufacturer’s domestic gross receipts and aggregate cost of goods and services related to producing the domestic goods. This reduced tax is intended to reward manufacturers for producing goods domestically instead of overseas.

Explaining ‘Qualified Production Activities Income – QPAI’

The IRS mandates that any domestic manufacturer of goods can exclude 6% of all income derived from goods production from income taxation in 2008 and 2009. The tax-free rate for QPAI increases to 9% in 2010.

This type of income does not include revenue generated from the restaurant industry, electricity or natural gas production or real estate transactions.

Further Reading

  • The Effect of corporate taxation on investment and financial policy: evidence from the DPAD – www.aeaweb.org [PDF]
  • Notice 2005-14 Provides Important Guidance on New Code Sec. 199 Deduction for Qualified Production Activities – heinonline.org [PDF]
  • The business investment response to the Domestic Production Activities Deduction – www.jstor.org [PDF]
  • What the Jobs Act Could Mean for Transfer Pricing – heinonline.org [PDF]
  • Maximizing the Section 199 Deduction: Starting This Year, the Domestic Manufacturing Deduction Increases to 9% of Income from Eligible Activities – www.questia.com [PDF]
  • Which Companies Use the Domestic Production Activities Deduction? – papers.ssrn.com [PDF]
  • The effect of the domestic production activities deduction on corporate payout behavior – papers.ssrn.com [PDF]
  • Application of the Domestic Production Activities Tax Deduction (Relating to a Wide Range of Industries) – clutejournals.com [PDF]