The American Bankers Association and a broad coalition of trade associations today urged congressional leaders to oppose any efforts to reduce or repeal the 20% deduction for qualified business income under Section 199A—including phasing out the deduction above certain income thresholds. The deduction—which was enacted as part of the 2017 tax reform law—applies to certain qualified businesses income received from sole proprietorships, pass-through entities such as partnerships or businesses operating under a Subchapter S election and other selected entities.
Should lawmakers move ahead with an overhaul of Section 199A, the groups pointed out that it would lead to significantly higher taxes for small businesses, especially for individual or family-run firms, placing them at a competitive disadvantage. They added that the recent tax plan outlined by the Biden administration did not include changes to the existing deduction.
“Proposals to limit or repeal the deduction would hurt main street businesses and result in fewer jobs, lower wages, and less economic growth in thousands of communities across the country,” the groups wrote. “Such changes would amount to a direct tax hike on America’s main street employers, a key reason why the tax plan released by the White House in March left the deduction fully intact.”