Legislation would limit 20% deduction for qualified business income
Sen. Ron Wyden (D-Ore.), chairman of the Senate Finance Committee, recently introduced the Small Business Tax Fairness Act to reform the Section 199A pass-through business deduction created in the Tax Cuts and Jobs Act of 2017. The legislation would limit the 20% deduction for qualified business income for S corporations, sole proprietorships and other pass-through entities, which is set to expire in 2025.
Wyden’s proposal phases out the deduction starting at taxable income of $400,000 per year and caps the deduction at anyone making more than $500,000. It would allow a deduction of 20% of the lowest of either taxable income, $400,000 or taxable income reduced by a taxpayer’s net capital gains for the year. In addition, Wyden’s bill would remove the current restriction that the full pass-through deduction is limited to “specified service trades or businesses.”
Wyden’s changes would apply starting with the 2022 tax year assuming enactment later this year. Biden suggested a similar proposal during his presidential campaign, but it was not included in his budget request. Treasury officials who described the president’s budget request subsequently said not everything from the campaign made it into the proposal.
NRCA supports making the Main Street Tax Certainty Act’s 20% deduction—as currently written—permanent without the income limits in Wyden’s proposal.
California commission mandates solar for new buildings starting in 2023
The California Energy Commission’s five-member panel voted unanimously Aug. 11 to require solar panels and battery storage in new commercial buildings and high-rise residential projects beginning Jan. 1, 2023, according to The New York Times. The proposal now will be considered by the state’s Building Standards Commission, which is expected to include it in an overall revision of the building code in December.
The energy plan also calls for new homes to be wired in ways that ease and encourage conversion of natural-gas heating and appliances to electric sources.
Commercial buildings affected by the plan include hotels, offices, medical offices and clinics, retail and grocery stores, restaurants, schools, and civic spaces such as theaters, auditoriums and convention centers.
The provisions would supplement requirements that took effect in 2020 mandating new single-family homes and multifamily dwellings up to three stories high include solar power.
The commission said homes and businesses use nearly 70% of California’s electricity and are responsible for a quarter of its greenhouse gas emissions. The proposal reportedly would reduce emissions over 30 years—as much as if nearly 2.2 million cars were taken off the road for a year.
According to the commission, any increase in construction costs is expected to be minimal; adding solar power and storage during construction is considered more cost-effective than retrofitting.
Many California cities have building codes that restrict or ban natural gas in new construction, but the changes advanced in the proposal significantly would extend the move away from fossil fuels.