J.K. Lasser's Small Business Taxes 2013: Your Complete Guide to a Better Bottom Line

Qualified Producers

Only “qualified producers” can claim the deduction. The term is not limited to traditional manufacturers in the United States. It applies to a business that engages in any of the following activities:

• Selling, leasing, or licensing items manufactured, produced, grown, or extracted in the United States in whole or significant part (see safe harbor discussed later).
• Selling, leasing, or licensing films (other than sexually explicit productions) produced in the United States (50% or more of compensation relating to production relates to services of actors, directors, producers, and service personnel performed in the United States).
• Construction in the United States includes both erection and substantial renovation of residential and commercial buildings. While there is no IRS guidance on what constitutes a substantial renovation, it can be assumed to be any cost that would be required to be capitalized (as opposed to a currently deductible repair).
• Engineering and architectural services relating to a construction project performed in the United States.
• Software developed in the United States, regardless of whether it is purchased off-the-shelf or downloaded from the Internet. The term “software” includes video games. But, with some de minimis exceptions, the term does not include fees for online use of software, fees for customer support, and fees for playing computer games online.

While it could be argued that every business produces something, not every business ...