What is a Qualified production activity?

A qualified production activity (QPA) is any manufacturing, production (limited to agricultural or chemical activities), or refining of tangible personal property where the taxpayer's activities result in a substantial transformation of the input materials. Under OBBBA Section 70308 and IRC Section 168(n), only taxpayers conducting a QPA in their own facility may claim the qualified production property (QPP) deduction. Per IRS Notice 2026-16, storage of raw materials and supervisory oversight within the same facility also constitute QPA. Activities that do not involve substantial transformation, such as packaging, simple assembly, or retail food preparation, do not constitute a QPA. The Depreciation and amortization rules under IRC Section 168 determine how eligible facility costs are deducted on Form 4562.

Related Terms

What is Qualified production property?

What is Substantial transformation?

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