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Bill > HR1296

US HR1296

US HR1296
To amend the Internal Revenue Code of 1986 to provide appropriate rules for the application of the deduction for income attributable to domestic production activities with respect to certain contract manufacturing or production arrangements.

summary

Introduced
03/01/2017
In Committee
03/01/2017
Crossed Over
Passed
Dead
12/31/2018

Introduced Session

115th Congress

Bill Summary

To amend the Internal Revenue Code of 1986 to provide appropriate rules for the application of the deduction for income attributable to domestic production activities with respect to certain contract manufacturing or production arrangements. This bill amends the Internal Revenue Code to specify rules for applying the deduction for income from domestic production activities to contract manufacturing or production arrangements. In a contract manufacturing or production arrangement, a person contracts with one or more unrelated persons for the manufacture, production, growth, or extraction of an item of qualifying production property (tangible personal property, computer software, and sound recordings) or film. The qualifying production property must be manufactured, produced, grown, or extracted in whole or significant part within the United States. In an arrangement in which any person makes a substantial contribution through the activities of its employees within the United States to the manufacture, production, growth, or extraction of qualifying production property: (1) the person shall be treated as engaging in the activity, and (2) the domestic production gross receipts of the person shall include the gross receipts received under the arrangement for the activities. The Internal Revenue Service must prescribe regulations that include specified factors for determining a substantial contribution. A person with an economic risk of loss of more than 50% of the direct material costs necessary to the manufacture, production, growth, or extraction of the qualifying production is deemed to make a substantial contribution. The parties to an arrangement may agree in writing to: (1) make only one person eligible for the deduction, or (2) apply the rules retroactively to tax years in which only one person claimed the deduction.

AI Summary

This bill amends the Internal Revenue Code to specify rules for applying the deduction for income from domestic production activities to contract manufacturing or production arrangements. In these arrangements, a person contracts with one or more unrelated parties to manufacture, produce, grow, or extract qualifying production property (such as tangible personal property, computer software, and sound recordings) within the United States. The bill states that if a person makes a substantial contribution through the activities of its U.S. employees to the manufacture, production, growth, or extraction of the qualifying property, that person shall be treated as engaging in the activity and their domestic production gross receipts shall include the payments received under the arrangement. The bill provides factors for determining a "substantial contribution" and a safe harbor for when a person is deemed to make a substantial contribution if they have an economic risk of loss of more than 50% of the direct material costs. The amendments made by this bill apply to taxable years beginning after the date of enactment, but there is an option for retroactive application in certain cases.

Committee Categories

Budget and Finance

Sponsors (10)

Last Action

Referred to the House Committee on Ways and Means. (on 03/01/2017)
(1 Companion Bills)

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