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Senate Reintroduces Bill to Make 20% Tax Deduction for Small Businesses Permanent

The deduction is set to expire in 2025 but is heavily relied upon by many Big “I” members and their clients.
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senate reintroduces bill to make 20% tax deduction for small businesses permanent

Last week, Sen. Steve Daines (R-Montana), along with 12 other senators, reintroduced the “Main Street Tax Certainty Act" into the U.S. Senate. The legislation would make permanent the 20% small business deduction (Section 199A) that was passed as part of the 2017 Tax Cuts & Jobs Act.

The deduction, which is scheduled to expire at the end of 2025 and applies to “qualified business income" of pass-through businesses, such as subchapter S corporations, partnerships and sole proprietorships, is heavily relied upon by many Big “I" members and their clients to expand their small businesses, hire more employees and better serve their communities.

More than two-thirds of the approximately 20,000 insurance agencies and brokerages the Big “I" represents are organized as pass-through entities, and they continue to see significant benefits from the deduction. Pass-through entities have factored this deduction into their operations so its expiration would effectively result in a tax increase on many small businesses. This would create an unlevel playing field and put pass-throughs at a disadvantage to those filing taxes at the corporate rate.

The bill was reintroduced a matter of weeks after the 2023 Big “I" Legislative Conference in Washington, D.C., when Big “I" members advocated for the deduction and other issues that are imperative to their business and community on Capitol Hill. After the bill was reintroduced, the Big “I" joined a number of other small business groups in sending a letter to Sen. Daines in support of his legislation and efforts to help millions of small businesses.

Rep. Jason Smith (R-Missouri), chairman of the U.S. House Committee on Ways and Means, has held several field hearings across the United States on potential tax legislation, including the 20% small business deduction. Rep. Smith, who received the Big “I" Legislator of the Year Award during this year's Legislative Conference, has been a champion on the issue in the House of Representatives and has publicly stated that the deduction is a top priority for the committee this Congress. A companion bill in the House of Representatives is expected to be released later this year.

As Congress continues to discuss tax reform and related legislation, the Big “I" will continue to advocate for independent insurance agents and provide updates through the News & Views e-newsletter.

Raaed Haddad is Big “I" director of federal government affairs.

Thursday, June 22, 2023
On the Hill