Big "I" Continues Advocacy on Federal Tax Issues

    Posted by MAIA on April 30, 2018

    by Jennifer Webb, Big "I" Federal Government Affairs Counsel

    At last week’s Big “I” Legislative Conference, one of the top issues was implementation of the provisions of the new tax law that relate to pass-through entities. A key provision of the law, which took effect earlier this year, adds a section to the individual tax code (26 U.S.C. §199A) that creates a 20% deduction on “qualified business income” for owners and shareholders of pass-through businesses, such as subchapter S corporations, partnerships and sole proprietorships. 

    At last week’s Big “I” Legislative Conference, one of the top issues was implementation of the provisions of the new tax law that relate to pass-through entities. A key provision of the law, which took effect earlier this year, adds a section to the individual tax code (26 U.S.C. §199A) that creates a 20% deduction on “qualified business income” for owners and shareholders of pass-through businesses, such as subchapter S corporations, partnerships and sole proprietorships.

    Two-thirds of Big “I” member agencies are organized as pass-through entities, and many should be able to benefit from the new deduction in whole or in part. However, it is currently unclear whether the Internal Revenue Service (IRS) will consider insurance agencies and brokerages a “specified service trade or business” in any implementation regulations or guidance on the new law. This distinction is important because an owner or shareholder of a “specified service trade or business” with annual taxable income above $415,000 (joint) and $207,500 (single) is prohibited from utilizing the new deduction.

    The Big “I” believes that Congress did not intend to limit insurance agency owners from receiving the full benefits of the pass-through deduction, because Congress specifically excluded the word “insurance” from the new law’s definition of a “specified service trade or business.” Additionally, interpreting the pass-through provisions of the law in a narrow and exclusionary manner is against the broad public policy goals of the law: to create jobs and grow the economy.

    The Big “I” is working with a coalition of other producer groups to advocate on this issue before the Treasury Department and the IRS. Last week, the coalition sent a letter to key department officials and has also held calls and meetings with the department. The Big “I” is hopeful that any implementation regulations or guidance, expected later this year, will treat agents and brokers appropriately.

    *This story first appeared in IA Magazine 


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    Topics: The Massachusetts Agent

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