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IRS Determines that Mobile Billboards Qualify for Section 199, Domestic Production Activities Deduction

Domestic Production Activities Deduction

The IRS Chief Counsel determined that mobile billboards qualify for Code Section 199 Production Activity Deduction.

In this determination, the taxpayer submitted a fact pattern based on two sets of facts.  The first set of facts were billboards that are permanently affixed to the ground as one would view along a roadside or interstate.  The other set of billboards were manufactured to be set on trucks and driven around to advertise throughout an area.

The IRS determined that permanent billboards do not qualify for the Domestic Manufacturing Deduction.  The mobile boards on the other hand, are movable objects combining two or more materials and concepts together to get one advertising item.  Therefore in a determination letter, the Chief Counsel acquiesced and stated that mobile billboards do qualify for the Deduction.

Editor’s Comments

This is important because it illustrated the broadness of the deduction and what the IRS and Congress intended on allowing the law to apply. A plain reading of the text and regulations imply a wide cast net, but maybe not this wide.  Kudos to the IRS for issuing this determination for the manufacturing companies.

By: Basi & Basi at the Center for Financial, Legal and Tax Planning for Transworld M&A Advisors