The IRS Large Business and International (LB&I) Division has announced that it will not treat certain activities as manufacturing, producing, growing or extracting (MPGE), making them ineligible for the domestic production activities deduction under Section 199 when performed at the retail level. The directive ( LB&I-04-0315-001) applies to the following activities:
- Cutting blank keys to a customer's specification
- Mixing base paint and a paint coloring agent
- Applying garnishments to cake that is not baked where sold
- Applying gas to agricultural products to slow or expedite fruit ripening
- Storing agricultural products in a controlled environment to extend shelf life
- Maintaining plants and seedlings
Similar activities also may be non-MPGE, depending on the facts and circumstances of the taxpayer's activities, processes through which the activities are performed and the taxpayer's industry. The directive asks IRS field agents to contact the LB&I Corporate Income & Losses Issue Practice Group if a taxpayer claims a Section 199 deduction for activities that are different from, but similar to, those described above, in order to expand the list of non-MPGE activities as appropriate.
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