The Big “I” joined a number of other small business groups in sending a letter of support for the bill that will help millions of small businesses, including many Big “I” members, during this difficult time.
At the end of last week, Reps. Jason Smith (R-Missouri) and Henry Cuellar (D-Texas) and Sen. Steve Daines (R-Montana) reintroduced the “Main Street Tax Certainty Act." This legislation would make permanent the 20% deduction on “qualified business income" for some owners and shareholders of pass-through businesses.
As a result of the bill's reintroduction, the Big “I" joined a number of other small business groups in sending a letter of support to the leadership of the U.S. Senate Finance Committee and the House Committee on Ways and Means. The letter notes that making the 20% deduction permanent will help millions of small businesses during this difficult time, leading to higher economic growth and more employment.
A provision of the 2017 Tax Cuts and Jobs Act added a section to the individual tax code (26 U.S.C. §199A) that created the 20% deduction on “qualified business income" for some owners and shareholders of pass-through businesses, such as subchapter S corporations, partnerships and sole proprietorships. On Jan. 18, 2019, after numerous advocacy efforts from the Big “I," the IRS issued final regulations implementing Section 199A of the tax code ensuring that a greater number of owners and shareholders of insurance agencies and brokerages organized as pass-through entities are eligible for the new deduction.
However, the deduction is only available through the end of 2025. For the deduction to be available in 2026, Congress must extend Section 199A of the tax code for an additional amount of time or make the deduction permanent.
More than two-thirds of the 20,000 insurance agencies and brokerages the Big “I" represents are organized as pass-through entities and are currently seeing significant benefits from the new deduction. The deduction has allowed insurance agency and brokerage owners to reinvest and grow their businesses, hire new employees and better serve their consumers.
Unlike the 20% deduction for small businesses, the C corporation rate reduction in the 2017 tax reform law was made permanent. The Main Street Tax Certainty Act seeks to allow these pass-through insurance agencies and brokerages across the country to compete with their C-corp counterparts that now have the benefit of the permanent 21% tax rate.
Making this important tax deduction for small businesses permanent will be a top priority for the Big “I" at the 2021 Big “I" Legislative Conference, which will take place virtually April 13-16.
Wyatt Stewart is Big “I" assistant vice president of federal government affairs.