The bill would make permanent the 20 percent deduction on business income for pass-through entities, the vast majority of which are small businesses.

Congressman Lloyd Smucker (R-PA) introduced legislation, the Main Street Certainty Act, which would make permanent the 20 percent qualified business income (QBI) deduction under Section 199A of the Internal Revenue Code. This deduction, which was a major priority of AGC during consideration of the 2017 Tax Cuts and Jobs Act, allows qualified businesses organized as pass-through entities, such as S Corporations, LLC’s, or Sole Proprietorships, to deduct 20 percent of their business income, subject to certain limitations. Absent this deduction, there would be a major disparity between the tax rate paid by C Corporations at the corporate rate (21 percent), and pass-through entities taxed at the individual rate (up to 37 percent).

Unfortunately, the Tax Cuts and Jobs Act, which created the QBI deduction, made this provision temporary, and it will expire in 2025 absent congressional action. Rep. Smucker’s legislation would make it permanent.

The bipartisan legislation is currently co-sponsored by 99 members of Congress, and mirrors legislation introduced by Senator Steve Daines (R-MT) earlier this year.

If you have any questions, please contact Matthew Turkstra at [email protected], or (202) 547-4733.