For the first time, U.S. businesses will be able to write off expenses related to “qualified domestic production activities.” The so-called “manufacturing deduction” (or Sect. 199 deduction) is available even to many companies that wouldn’t normally consider themselves “manufacturers,” maybe even yours.
What’s new? Just in the nick of time, the IRS published proposed regulations that explain the ins and outs of this new deduction. (REG-105847-05) Those regulations expand and clarify guidance initially issued by the IRS last February (IRS Notice 2005-14). See the box below for links to both documents.
Advice: To take maximum advantage of the deduction on your 2005 return, cherry-pick the guidance from each of those documents that best suits your business. The IRS says you can rely on either document until final regs are issued sometime in 2006.
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