what is the qualified production activities income 
qualified production activities income qpai is the portion of income derived from domestic manufacturing and 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 domestic goods 1 the tax deductibility of qpai is intended to reward manufacturers for producing goods domestically instead of overseas understanding qualified production activities income qpai section 199 of the internal revenue code irc mandates that qualified production activities income qpai be taxed at a lower rate 2 qpai refers to certain income related to manufacturing that is equal to the excess of the business taxpayer s domestic production gross receipts dpgr over the sum of the cost of goods that are allocable to such receipts and other expenses losses or deductions which are properly allocable to such receipts domestic production gross receipts dpgr are gross receipts from the manufacture production growth or extraction of qualifying production property a company that generates qpai in a qualifying tax year qualifies for the domestic production activities deduction dpad 3 u s based business allowable dpad generally cannot be more than 9 of its qpai a taxpayer with oil related qpai also must reduce the dpad by 3 of the least of the following amounts oil related qpai qpai and adjusted gross income for an individual estate or trust taxable income for all other taxpayers figured without dpad 4 in addition the deduction is limited to 50 of the w 2 wages paid by the taxpayer during the calendar year that ends with or within the tax year an employer that did not pay any form w 2 wages or have form w 2 wages allocated to him her on a schedule k 1 cannot claim a dpad 5 the dpad was in effect for small and large u s based business activities between 2005 and 2017 and expired on december 31 2017 6 irc section 199 defines qualified production activities to include qpai will be the same as gross income for a business that engages in only one line of business but businesses with multiple lines of businesses must allocate their incomes 4 individuals corporations cooperatives estates and trusts use irs form 8903 to figure their allowable qualified production activities income qpai and form w 2 wages are figured by only taking into account items that are attributable to the actual conduct of a trade or business qpai does not include revenue generated from the restaurant industry electricity or natural gas distribution or real estate transactions 8 