Table of Contents
- Line 1Domestic Production Gross Receipts (DPGR)
- Line 2Allocable Cost of Goods Sold
- Line 3
- Line 4
- Line 7
- Line 9
- Line 10a Oil-Related Qualified Production Activities Income
- Line 11Income Limitation
- Line 14a
- Line 14b Reduction for Oil-Related Qualified Production Activities Income
- Line 16Form W-2 Wages
- Line 17
- Line 19
- Line 24Expanded Affiliated Group Allocation
- Line 25Domestic Production Activities Deduction
If you aren't using the small business simplified overall method, enter your cost of goods sold allocable to DPGR (discussed earlier).
If you are using the simplified deduction method (discussed earlier), enter the other deductions or losses you ratably apportion to DPGR. If you are using the section 861 method (discussed earlier), enter the other deductions or losses you allocate and apportion to DPGR. If you are using small business simplified overall method, see the instructions for line 4 below.
If you are using the small business simplified overall method (discussed earlier), enter the amount of cost of goods sold and other deductions or losses you ratably apportion to DPGR.
Beneficiaries of estates and trusts, partners, and S corporation shareholders report the QPAI distributed from estates or trusts, and certain partnerships or S corporations on line 7. The QPAI should be reported to you on Schedule K-1 for Forms 1041, 1065, or 1120S. See the related Schedule K-1 and its instructions for more information.
Estates and trusts must use Regulations section 1.652(b)-3 to allocate QPAI to beneficiaries if DNI is distributed or required to be distributed to beneficiaries. Report the amount of QPAI allocated to beneficiaries on line 9. See Estates and trusts, earlier.
Add lines 1 through 9, column (a), to determine oil-related QPAI. If you don't have oil-related QPAI, don't complete lines 1 through 9, column (a), and enter zero on line 10a.
If you have extraterritorial income (ETI), figure taxable income without regard to any claimed ETI exclusions.
See Regulations section 1.199-1(b)(1) for more information.
If you have oil-related qualified production income, use line 14a to determine the least of the following amounts.
Oil-related QPAI—line 10a,
QPAI—line 10b, or
Adjusted gross income for an individual, estate, or trust (taxable income for all other taxpayers)—line 11.
All others, enter zero on line 14a.
If you have oil-related qualified production income, use line 14b to reduce your DPAD by 3% of the amount reported on line 14a.
All others, enter zero on line 14b.
Enter your Form W-2 wages that are properly allocable to DPGR (discussed earlier). Don't include Form W-2 wages you must report on line 17.
Beneficiaries of estates and trusts, partners, and S corporation shareholders report the Form W-2 wages distributed from estates or trusts, and certain partnerships or S corporations on line 17. The Form W-2 wages should be reported to you on the Schedule K-1 for Forms 1041, 1065, or 1120S. See the related Schedule K-1 and its instructions for more information.
Estates and trusts must use Regulations section 1.652(b)-3 to allocate Form W-2 wages to beneficiaries if DNI is distributed or required to be distributed to beneficiaries. Report the amount of the Form W-2 wages allocated to beneficiaries on line 19. See Estates and trusts, earlier.
The instructions below explain how expanded affiliated groups (EAGs) (defined earlier) figure and report the DPAD. Certain members of an EAG may not be required to complete the entire Form 8903. See How To Report, later.
In general, the DPAD for an EAG is determined by aggregating each member's taxable income or loss, QPAI, and Form W-2 wages. A member's QPAI may be positive or negative. Also, a member's taxable income or loss and QPAI are determined under the member's method of accounting.
Attributable to the period that the member of the EAG and the reporting member are both members of the EAG, and
Taken into account in a tax year that ends with or within the tax year of the reporting member with respect to which the DPAD is figured.
The EAG's DPAD is allocated among members of the EAG based on the ratio of each member's QPAI to the total QPAI of the EAG. The allocation is made regardless of whether the EAG member has taxable income or loss or Form W-2 wages for the tax year. If a member has negative QPAI, that member's QPAI is treated as zero for purposes of the allocation.
Under section 199, a consolidated group is treated as a single member of the EAG. If all members of an EAG are members of the same consolidated group, the DPAD of the consolidated group is determined based on the consolidated taxable income or loss, QPAI, and Form W-2 wages of the group and not the separate taxable income or loss, QPAI, and Form W-2 wages of its members. The consolidated group will generally file only one Form 8903. For details, see Regulations section 1.199-7.
If an EAG includes both consolidated and non-consolidated members, the consolidated (not separate) taxable income or loss, QPAI, and Form W-2 wages of the consolidated group are aggregated with the taxable income or loss, QPAI, and Form W-2 wages of the non-consolidated group members to determine the DPAD. For details, see Regulations section 1.199-7(d)(4).
A consolidated group's DPAD (or the DPAD allocated to a consolidated group that is a member of an EAG) is allocated to the members of the consolidated group in proportion to each member's QPAI, if any, regardless of whether the consolidated group member has:
Separate taxable income or loss for the tax year, and
Form W-2 wages for the tax year.
For purposes of allocating the DPAD of a consolidated group among its members, any redetermination of a corporation's receipts, cost of goods sold, or other deductions from an intercompany transaction described in Regulations section 1.1502-13(c)(1)(i) or (c)(4) isn't taken into account, and if a consolidated group member has negative QPAI, the member's QPAI is treated as zero.
All members of an EAG are treated as a single corporation for purposes of determining the DPAD. However, the DPAD is allocated to each member.
The reporting member also does the following.
Enters the portion of the deduction allocated to the other members of the EAG (including non-computing members) as a negative number on line 24.
Completes lines 23 and 25.
Attaches a schedule showing how the reporting member figured its own QPAI.
Attaches a schedule that shows how the DPAD was figured for the group and each member's name, EIN, and share of the DPAD.
Provides a copy of the group DPAD computation schedule to the other computing members of the group.
Completes a separate Form 8903, skips lines 1–22, and enters its share of the group deduction on line 24 as a positive number.
Completes lines 23 and 25.
Attaches a schedule showing how the computing member figured its own QPAI.
Attaches a copy of the group DPAD computation schedule provided by the reporting member.
Combine lines 22 through 24 and enter the result on line 25 and the appropriate line of your tax return.
Reduce the amount the cooperative deducts under section 1382 by the portion of the cooperative's DPAD allocated to its patrons. However, the entire amount on line 25, which includes any amount allocated to patrons, is deductible under section 199 by the cooperative. See Agricultural and horticultural cooperatives for more information on this subject.
Cooperatives that have only patronage income and deductions generally complete the Form 8903 as described earlier in the instructions.
Cooperatives with both patronage and nonpatronage income or deductions must follow the instructions below for completing Form 8903.
Report the total amount of the DPAD to be claimed on Form 1120-C on line 25 of Form 8903, and leave lines 1 through 24 blank. Attach to Form 8903 separate calculations of the DPAD from patronage and nonpatronage activities, which conform to lines 1 through 24 of the Form 8903.
Enter the DPAD from patronage and nonpatronage sources reported on the attachment, on line 6a, column (a), Patronage, and line 6a, column (b), Nonpatronage, respectively, of Schedule G, Form 1120-C.
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