No Sec. 199 deduction for these activities

The IRS Large Business & International (LB&I) Division issued guidance to its employees in memo LB&I-04-0315-001 listing activities performed “at the retail level” that it said do not produce property that is “manufactured, produced, grown, or extracted” (MPGE), as defined by Regs. Sec. 1.199-3(e), in whole or significant part in the United States that could qualify for the domestic production deduction of Sec. 199. They are:

  • 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; and
  • Maintaining plants and seedlings.

Other similar activities may also be non-MPGE, depending on the facts and circumstances, the memo stated.


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