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On July 20, 2021, Senate Finance Committee Chairman Ron Wyden (D-OR) introduced the Small Business Tax Fairness Act (S.2387). This proposal would usher in significant changes, most detrimental, to the current 20% deduction for qualified business income for pass-through entities (also known as the 199A deduction). The 199A deduction arose from the 2017 Tax Cuts and Jobs Act (TCJA) and was intended to give some parity on tax rates between C Corps and the pass-through entities. Unlike the TCJA’s provisions for C-corporations, which are permanent, the 199A deduction will sunset at the end of 2025. Since its introduction, GCCA and our coalition partners have been advocating for Congress to improve upon, and make permanent, the 199A deduction. The principles set forth in the Small Business Tax Fairness Act were not included in President Biden’s latest budget proposal. However, during the 2020 campaign, Biden did state his support for limiting or eliminating the 199A deduction for high income taxpayers and it is very possible that some or all of the provisions in this proposal may make their way into the upcoming “social infrastructure” bill. This is particularly true because this bill would be a short-term revenue raiser with the Tax Foundation estimating that it would raise $114 billion in a four-year period before 199A is set to sunset. GCCA will continue to monitor this bill and provide updates on any actions that may be taken.
Read the full bill HERE.