The Tax Cut and Jobs Act repeals the Domestic Production Activities Deduction (DPAD).
Prior Law
Through December 31, 2017
The Domestic Production Activities Deduction (DPAD) was a deduction allowed to manufacturers, contractors, farmers and other defined producers based on income, wages and other costs applicable to production. For 2017, the deduction was 9% of defined production income. Pass-through entities DPAD activity was allocated to owners of the entity.
New Law
Effective for tax years beginning after December 31, 2017
The DPAD is repealed for tax years beginning after December 31, 2017 (generally 2018).
Commentary
The DPAD was a benefit to producers that provided significant tax benefit. However, lower tax rates offset the loss of this deduction as do other deductions such as the extension of bonus depreciation.
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