Can I take a deduction for Domestic Production Activities Deduction (DPAD)?

Under the Internal Revenue Code (IRC) Section 199, partnerships and S corporations (i.e., Forms U.S. 1120S and U.S. 1065) are not allowed to take the Domestic Production Activities deduction (DPAD) for federal purposes. Similarly, for Illinois purposes, taxpayers filing Forms IL-1120-ST and IL-1065 are not allowed to deduct those amounts when calculating their Illinois income subject to the Personal Property Replacement Income Tax. According to IRC Section 199, partners and shareholders are entitled to the deduction, and therefore, are also entitled to the deduction when calculating their taxable Illinois income. For more information, please see Informational Bulletin FY2006-07, Domestic Activities Production DeductionFor tax years ending on December 31, 2017, the DPAD allowed under Section 199 of the Internal Revenue Code (IRC) must be added back to federal taxable income on Line 9 of Schedule M. For tax year ending on or after December 31, 2018, DPAD is included in federal taxable income due to a change in federal reporting and is not reported on Illinois returns. 

If you have additional inquiries, you may submit them to the Questions, Comments, or Request form.