New Chief Counsel Advice regarding Section 199 may apply to retail advertising flyers produced under a contract manufacturing arrangement

Retail & Consumer Products Quickbrief

In a recently released Chief Counsel Advice (CCA) that was issued in response to an IRS Appeals Division (Appeals) request, the IRS concluded that planning and development activities undertaken by a publisher of books and other printed materials (collectively, books) did not constitute a qualifying manufacture, production, growth, or extraction (MPGE) activity for purposes of the Section 199 deduction. Retailers that engage in similar activities, like the planning and development of retail advertising flyers, and rely on such activities to qualify for the Section 199 deduction, should consider the potential impact of this CCA, especially in the context of contract manufacturing arrangements.

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