U.S. Rep. Lloyd Smucker (R-PA) is sponsoring a bill in the House that would make permanent a tax provision within the 2017 Tax Cuts and Jobs Act.
His bill, the Main Street Tax Certainty Act (H.R. 4721), would permanently extend Section 199A of the Internal Revenue Code, which is slated to expire in 2025. Section 199A, which was adopted as part of the 2017 Tax Cuts and Jobs Act, allows for a 20 percent deduction of qualified income for pass-through businesses. This includes small businesses organized as sole proprietorships, partnerships, S corporations, trusts, or estates. Further, it encompasses income from qualified REIT dividends and income from publicly traded partnerships.
This section was included in the Tax Cuts and Jobs Act to promote equity in America’s tax code between small businesses with larger corporations, Smucker said.
“Small businesses are the engine of America’s economy. The Tax Cuts and Jobs Act, in particular Section 199A, unleashed a robust economy where small businesses invested in their communities, creating more jobs and business opportunities. Providing permanency to this critical pro-growth tax policy will ensure small businesses continue to have tax parity with corporations and will strengthen main streets across the nation,” Smucker said.
Smucker’s legislation is cosponsored by 92 House members and is supported by all the Republican Members of the House Ways & Means Committee.
“Tens of millions of Americans and nearly half the U.S. workforce are employed by the small businesses who are the economic drivers of our local communities. Congress must continue supporting policies that create a level playing field for American job-creators and allow Main Street businesses to thrive. The Main Street Tax Certainty Act would make permanent the small business deduction, ensuring our economy continues to grow and creating good-paying American jobs,” Ways & Means Committee Chair Rep. Jason Smith (R-MO) said.
A recent study from the S Corporation Association said private companies organized as pass-through businesses employ 58 percent of all private sector workers. It also said that tax parity between small businesses organized as pass-through entities and corporations will end if Section 199A ceases to exist.
The Main Street Tax Certainty Act is supported by over 160 organizations, including the National Federation of Independent Businesses, the National Association of Manufacturers, Associated Builders and Contractors, the American Farm Bureau Federation, and the U.S. Chamber of Commerce.
“Small and medium manufacturers, often organized as pass-through entities, are the backbone of the American supply chain. Section 199A allows pass-throughs to deduct 20 percent of their qualified business income, enhancing the ability of small firms to reinvest in their businesses and their workers and increasing the resilience of manufacturers in America. Unfortunately, Section 199A is scheduled to be eliminated at the end of 2025,” Chris Netram, managing vice president of policy for the National Association of Manufacturers, said.
U.S. Sen. Steve Daines (R-MT) has introduced companion legislation in the senate, with 18 cosponsors.