H.R.1, which is now the law of the land, permanently extends the 20 percent deduction for qualifying noncorporate business income (QBI).

The end result came after a rollercoaster of a journey through the legislative process. The House version increased the deduction to 23 percent and added restrictions on eligibility for the deduction. The Senate version dropped the deduction back to 20 percent and ultimately dropped new restrictions on eligibility for the deduction.

The Senate provision changed multiple times between its introduction on June 16 and its configuration when the Senate voted on it. As first offered by the Senate Finance Committee, the Section 199A provision contained a restriction on the use of state and local tax (SALT) deductions in calculating QBI, although not as restrictive as the House version. That restriction was dropped via an amendment during Senate debate on the bill.

The result, which is now current law, is that the Section 199A deduction is for 20 percent of QBI, without new restrictions on eligibility to take the deduction, and without an expiration date. The new law also modifies the rule’s phase-in range—increasing it from $50,000/single ($100,000/married filing jointly) to $75,000/single ($150,000/married filing jointly). The now-permanent Section 199A rule also provides a new minimum deduction of $400 (indexed).

Prospects: The current law 20 percent deduction from QBI appears relatively safe from efforts to repeal or modify it for the foreseeable future. That could change, of course, especially if Congress tackles deficit reduction via tax law changes. But there is right now no hint of such an effort on the near-term horizon.

NAIFA Staff Contacts: Diane Boyle – Senior Vice President – Government Relations, at dboyle@naifa.org; or Jayne Fitzgerald – Director – Government Relations, at jfitzgerald@naifa.org.