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U.S. senators file bill to support permanent small business tax relief

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Associations | Business Practices
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Fourteen U.S. senators, led by Montana Sen. Steve Daines, have introduced a bill to benefit small businesses with tax relief that would make a temporary 20% pass-through business tax deduction permanent.

The Main Street Tax Certainty Act amends the current tax code to support small businesses by saving them money to pay workers, hire additional employees, and maintain tax parity with large corporations. The 2017 Tax Cuts and Jobs Act created Section 199A of the Internal Revenue Code, allowing pass-through businesses to deduct up to 20% of qualifying income. The temporary tax deduction is set to expire at the end of 2025.

“Montana small businesses are the heartbeat of our Montana communities, and providing them much-needed tax relief will help our economy flourish,” Daines said in a statement. “Making this tax deduction permanent will help Montana small businesses thrive, create jobs and expand their operations.”

Pass-through businesses include sole proprietorships, partnerships, or S corporations and are not subject to corporate income tax. According to Daines’ research, pass-through businesses represent 98% of all businesses in the country and employ 50% of Americans.

The S Corporation Association says 199A permanence is necessary to balance out the tax treatment of pass-through businesses with the lower, 21% tax rate paid by C corporations. “As our work with EY comparing effective rates demonstrates, absent the 199A deduction, pass-through businesses would be subject to tax rates nearly one-third higher than comparative C corporations,” the association said.

The bill has received support from more than 130 groups, including the Society of Collision Repair Specialists (SCRS), the National Association of Manufacturing, the S Corporation Association, the National Federation of Independent Business (NFIB), the American Farm Bureau Federation, and the National Association of Professional Insurance Agents (PIA).

Republican Senators John Barrasso (Wyoming), Bill Hagerty (Tennessee), Marsha Blackburn (Tennessee), Jim Risch (Idaho), Bill Cassidy (Louisiana), Roger Marshall (Kansas), Katie Britt (Alabama), Mike Braun (Indiana), Chuck Grassley (Iowa), Tim Scott (South Carolina), Ted Cruz (Texas), Roger Wicker (Mississippi) and Kevin Cramer (North Dakota) joined Daines in introducing the bill.

In a letter written by the S Corporation Association to Daines, which more than 100 associations and organizations signed in support, said the tax relief allows small and individually-owned businesses the opportunity to remain competitive here and abroad.

“Section 199A is scheduled to sunset at the end of 2025, even as the businesses it supports continue to recover from the COVID-19 pandemic and the price hikes, labor shortages, and supply chain disruptions that followed,” the letter states. “The more quickly Congress acts to make Section 199A permanent, the sooner Main Street businesses will benefit.”

Montana-based Capital Collision Center owner Bruce Halcro told Repairer Driven News he supports the bill because the tax cut has had a significant positive impact on his business.

“It’s what creates our funding for training. It’s what helps us with keeping our wages current and any of our, benefits that we offer, such as health insurance and retirement,” he said. “When you cut into that, that’s a huge impact on a small business.

“A lot of the small businesses are struggling right now to get by. I don’t know what they would do if that changed. The inflation right now is a killer and then of course trying to stay current… competing with other trades for wages.”

Halcro added that inflation’s impact on the cost of goods, labor, and just about everything it takes to run a small business means any break helps.

“I haven’t had anything go down,” he said. “One of the things we run into is having a third-party billpayer most of the time. It isn’t like we can just up our rates.”

If the break sunsets, likely cuts would be to staffing or training as the industry already continues to grapple with a shortage of technicians.

“…its elimination would cause small businesses to curtail their hiring and growth plans,” said NFIB President Brad Close. “We are encouraged that Senator Steve Daines re-introduced the Main Street Tax Certainty Act in the Senate and urge members of the U.S. House to quickly follow.”


Featured image credit: Moon Safari/iStock

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