The Senate is preparing revisions to the massive budget and tax bill previously approved by the House with a goal of passing final legislation by July 4th. It is crucial to millions of Main Street businesses, many of which are owned or served by NAIFA members, that the final reconciliation bill makes the Section 199A deduction for pass-through businesses permanent and expands the deduction from 20 to 23%.
NAIFA is one of few financial services associations among the 119 organizations to delver a letter to Senator Mike Crapo (R-ID), Chairman of the Senate Committee on Finance, urging the Senate to preserve and expand the deduction.
The 2017 Tax Cuts and Jobs Act (TCJA) permanently reduced the corporate tax rate to 21%. However, many small businesses are structured so that they do not pay the corporate rate but rather pass their profits or losses directly to their owners. This means they are taxed at higher individual rates.
The TCJA recognized the imbalance and created the Section 199A deduction, which levels the playing field and ensures that small businesses are not taxed at a significantly higher rate than their corporate competitors. But while the TCJA's corporate rate cut is permanent, the deduction expires at the end of this year.
NAIFA strongly encourages the Senate to adopt the House version of the Section 199A deduction, both making it permanent and expanding it to 23%. Insurance and financial professionals recognize that small, Main Street businesses are at the heart of a vibrant and growing economy. Our tax laws must support their continued success.