Reduces by 3 percent the otherwise available deduction for domestic production activities (the section 199 deduction) for taxpayers with oil related qualified production activities income.
The deduction is limited to the lesser of the allowable percentage times the qualified production activities income or taxable income but cannot be more than 50% of W-2 wages.
For 2006, the domestic production activities deduction allows businesses to reduce taxable income by 3 percent of the lower of qualified production activities income or taxable income.
The objective of the new deduction is to allow taxpayers, for tax years beginning after 2004, a deduction equal to a statutory percentage multiplied by the lesser of a taxpayers qualified production activities income for a tax year or a taxpayer's taxable income for that year.
The deduction is a percentage of the lesser of the qualified production activities income (QPAI) of the taxpayer for the tax year or the taxable income for the tax year.
199 generally provides a deduction for qualifying domestic production activities equal to 9% (3% for tax years beginning in 2005 or 2006 and 6% for tax years beginning 2007-2009) of the lesser of the taxpayer's (1) qualified production activities income for the tax year or (2) taxable income, determined without regard to Sec.
10) Under the new rules in the TIPRA amendments, amounts described in paragraphs (3) and (8) of section 6051(a) that are paid with respect to employment of employees need to be determined and any portion of that amount that is not allocated or apportioned to DPGR to determine Qualified Production Activities Income (QPAI) (11) is excluded.
The Act revises this limitation so that the allowable deduction may not exceed 50 percent of the wages paid by the taxpayer that are allocable to its domestic production gross receipts for the taxable year in computing its qualified production activities income.
