Your allowable DPAD generally cannot be more than 6% of your qualified production activities income (QPAI). If you do not have QPAI, you generally are not allowed a DPAD.
QPAI is the result (if any) of:
- Domestic production gross receipts (DPGR) MINUS
- The sum of:
- Cost of goods sold allocable to DPGR plus
- Other expenses, losses, or deductions allocable to DPGR.
What is DPGR?
Generally, your DPGR is the sum of your gross receipts from the following activities:
- Construction of real property that was performed in the United States.
- Engineering or architectural services performed in the United States for construction of real property in the United States.
- Any lease, rental, license, sale, exchange, or other disposition of any of the following:
- Tangible personal property, computer softwared, and sound recordings that you manufactured, produced, grew, or extracted in whole or in significant part within the United States,
- Any qualified film you produced, or
- Electricity, natural gas, or potable water you produced in the United States.
Your DPGR does not include income derived from:
- The sale of food an dbeverages you prepared at a retail establishment;
- Property you leased, licensed, or rented for use by any related person;
- The transmission or distribution of electricity, natural gas, or potable water; or
- The lease, rental, license sale, exchange, or other disposition of land.
Gross receipts include the following:
- Total sales
- Amounts received for services, not including wages received as an employee
- Income from incidental or outside sources (including sales of business property)