What is the underlying goal of the new tax deduction for manufacturing activities?
Primarily, this tax deduction came as a result of a repeal of the Extraterritorial Income Exclusion. That exclusion was ruled as an illegal subsidy by the World Trade Organization about four years ago, and the American Jobs Creation Act of 2004 provided for the new deduction for U.S production activities. It is designed to give U.S. manufacturers a break for domestic production activities versus going overseas. What steps can a business owner take to capitalize on the tax changes? The number one step is to identify what their domestic production gross receipts are and to determine if there is an allocation that is going to be required. The new deduction is effective for the period beginning after December 31, 2004, so anyone with domestic production activities in the year 2005 would definitely be able to benefit from this. Businesses need to start doing their homework, as far as identifying domestic gross receipts versus other gross receipts. Also, they have to identify the costs relat
