What is the Domestic Production Activities Deduction (DPAD)?
Feb 07, 2020
|Greg Siems, Grain Marketing Advisor
What is the Domestic Production Activities Deduction (DPAD)? The DPAD is an allowed deduction based on the W2 wages and qualified business income of our cooperative. This deduction is made available to CFS, as well as other coops and non-C-Corporations. The allocation of this DPAD as it relates to you will show up in Box 6 of your 1099PATR.
This deduction is generated by engaging in activity that is for income/profit that we do with continuity and regularity as it pertains to rules that can be found in IRS code subsection 199A(g). The DPAD that is passed through to you is calculated based on the amount of grain business you have done with us during our fiscal year, and allocation is determined by our leadership as to what percentage of the whole DPAD will be available to you. Last year, 50% of the DPAD was made available, with the balance being recognized on this year’s 1099PATR. The DPAD is a deduction on your income taxes, and as such, a benefit that you derive when you do your grain business through CFS.
These benefits can be realized by doing a variety of contracts through grain marketing at CFS. For example, you could set a futures first contract with CFS and subsequently deliver those bushels to a non-CFS location at no extra charge beyond the initial contract. You could also direct ship through CFS to outside locations, in good standing with CFS, for a nominal fee of 1 cent. Delivering grain to CFS and through CFS will help you realize a larger DPAD deduction as it is calculated by the amount of grain business you do with us overall, regardless of destination.
***Please do not construe the following as tax advice, consult with your tax professional as to how the DPAD affects your individual tax situation. ****
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