Business Advocacy Groups Push Senate to Raise Pass-Through Deduction to 23 Percent

FEDA has joined other business advocacy groups in encouraging Congress to set the Section 199A deduction for pass-through businesses at 23 percent in the final version of the reconciliation bill.

The original version of the One Big Beautiful Bill Act, which was narrowly passed by the House of Representatives in May, included the 23 percent pass-through deduction for small- and family-owned businesses. This was an increase from the 20 percent deduction created by the 2017 Tax Cuts and Jobs Act as a way to put pass-through businesses on an even competitive playing field with corporations, which saw their tax rate lowered from 35 percent to 21 percent. However, the Senate Finance Committee is proposing that the pass-through deduction remain at 20 percent in the final bill, which could come forward for a full vote in the Senate before Independence Day.

In a letter to Sen. Mike Crapo (R-ID), chairman of the Senate Finance Committee, business advocacy organizations, including FEDA, expressed their strong support for making permanent and increasing the Section 199A deduction to 23 percent. “The Senate bill would make permanent the 199A deduction but also would cut in half their ability to deduct state and local taxes (SALT) as a business expense,” the letter states. “The net result will be a tax hike on millions of pass-through businesses relative to what they currently pay.

“Expanding the 199A deduction would offset this tax hike,” the letter continues. “It builds on a policy with a proven track record. Since its enactment, Section 199A has helped tens of millions of Main Street businesses reinvest in their operations and workforce.”

The full letter is available here.