118 STAT. 1425 PUBLIC LAW 108–357—OCT. 22, 2004 the taxpayer acquires, or disposes of, the major portion of a trade or business or the major portion of a separate unit of a trade or business during the taxable year. ‘‘(c) QUALIFIED PRODUCTION ACTIVITIES INCOME.—For purposes of this section— ‘‘(1) IN GENERAL.—The term ‘qualified production activities income’ for any taxable year means an amount equal to the excess (if any) of— ‘‘(A) the taxpayer’s domestic production gross receipts for such taxable year, over ‘‘(B) the sum of— ‘‘(i) the cost of goods sold that are allocable to such receipts, ‘‘(ii) other deductions, expenses, or losses directly allocable to such receipts, and ‘‘(iii) a ratable portion of other deductions, expenses, and losses that are not directly allocable to such receipts or another class of income. ‘‘(2) ALLOCATION METHOD.—The Secretary shall prescribe rules for the proper allocation of items of income, deduction, expense, and loss for purposes of determining income attrib utable to domestic production activities. ‘‘(3) SPECIAL RULES FOR DETERMINING COSTS.— ‘‘(A) IN GENERAL.—For purposes of determining costs under clause (i) of paragraph (1)(B), any item or service brought into the United States shall be treated as acquired by purchase, and its cost shall be treated as not less than its value immediately after it entered the United States. A similar rule shall apply in determining the adjusted basis of leased or rented property where the lease or rental gives rise to domestic production gross receipts. ‘‘(B) EXPORTS FOR FURTHER MANUFACTURE.—In the case of any property described in subparagraph (A) that had been exported by the taxpayer for further manufacture, the increase in cost or adjusted basis under subparagraph (A) shall not exceed the difference between the value of the property when exported and the value of the property when brought back into the United States after the further manufacture. ‘‘(4) DOMESTIC PRODUCTION GROSS RECEIPTS.— ‘‘(A) IN GENERAL.—The term ‘domestic production gross receipts’ means the gross receipts of the taxpayer which are derived from— ‘‘(i) any lease, rental, license, sale, exchange, or other disposition of— ‘‘(I) qualifying production property which was manufactured, produced, grown, or extracted by the taxpayer in whole or in significant part within the United States, ‘‘(II) any qualified film produced by the tax payer, or ‘‘(III) electricity, natural gas, or potable water produced by the taxpayer in the United States, ‘‘(ii) construction performed in the United States, or Applicability. Regulations.
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