[Congressional Bills 117th Congress]
[From the U.S. Government Publishing Office]
[S. 2387 Introduced in Senate (IS)]
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117th CONGRESS
1st Session
S. 2387
To amend the Internal Revenue Code of 1986 to improve the deduction for
qualified business income.
_______________________________________________________________________
IN THE SENATE OF THE UNITED STATES
July 20, 2021
Mr. Wyden introduced the following bill; which was read twice and
referred to the Committee on Finance
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to improve the deduction for
qualified business income.
Be it enacted by the Senate and House of Representatives of the
United States of America in Congress assembled,
SECTION 1. SHORT TITLE.
This Act may be cited as the ``Small Business Tax Fairness Act''.
SEC. 2. MODIFICATIONS TO DEDUCTION FOR QUALIFIED BUSINESS INCOME.
(a) In General.--
(1) Eligibility.--
(A) Deduction limited to individuals.--
(i) In general.--Section 199A(a) of the
Internal Revenue Code of 1986 is amended by
striking ``In the case of a taxpayer other than
a corporation'' and inserting ``In the case of
an individual''.
(ii) Application to trusts and estates.--
Section of such Code is amended by adding at
the end the following new subsection:
``(j) Deduction for Qualified Business Income.--No deduction shall
be allowed under section 199A to an estate or trust.''.
(B) Married taxpayers must file joint return.--
Section 199A(f) of such Code is amended by
redesignating paragraph (4) as paragraph (5) and by
inserting after paragraph (3) the following new
paragraph:
``(4) No deduction for married individuals filing separate
returns.--If the taxpayer is a married individual (within the
meaning of section 7703), this section shall apply only if the
taxpayer and the taxpayer's spouse file a joint return for the
taxable year.''.
(2) Amount of deduction.--
(A) Determination of amount.--Subsection (a) of
section 199A of the Internal Revenue Code of 1986 is
amended by striking ``an amount equal to the lesser
of'' and all that follows and inserting ``an amount
equal to 20 percent of the least of--
``(1) the qualified business income of the taxpayer,
``(2) the threshold amount, or
``(3) the taxable income of the taxpayer for the taxable
year reduced by the net capital gain (as defined in section
1(h)) of the taxpayer for such taxable year.''.
(B) Modification of threshold amount.--
(i) In general.--Section 199A(e)(2) of the
Internal Revenue Code of 1986 is amended to
read as follows:
``(2) Threshold amount.--The term `threshold amount' means
$400,000.''.
(C) Limitations.--Subsection (b) of section 199A of
such Code is amended to read as follows:
``(b) Limitations.--
``(1) Limitation based on taxable income.--The amount of
the deduction allowed under subsection (a) (determined without
regard to this paragraph) shall be reduced (but not below zero)
by an amount which bears the same ratio to such amount as--
``(A) the excess of the taxpayer's taxable income
over the threshold amount, bears to
``(B) $100,000.
``(2) Special rules with respect to income received from
cooperatives.--In the case of any qualified trade or business
of a patron of a specified agricultural or horticultural
cooperative, the amount of qualified business income taken into
account under subsection (a)(1) with respect to such trade or
business shall be reduced by the lesser of--
``(A) 9 percent of so much of the qualified
business income with respect to such trade or business
as is properly allocable to qualified payments received
from such cooperative, or
``(B) 50 percent of so much of the W-2 wages (as
defined in subsection (g)(1)) with respect to such
trade or business as are so allocable.''.
(3) Treatment of qualified reit dividends.--
(A) In general.--Section 199A(c) of such Code is
amended--
(i) by striking the last sentence in
paragraph (1) and inserting ``Such term shall
include qualified REIT dividends.'', and
(ii) by inserting ``(other than a qualified
REIT dividend)'' after ``Any dividend'' in
paragraph (3)(B)(ii).
(B) Technical amendment.--Section 199A(e)(3) of
such Code is amended by adding at the end the following
new flush sentence:
``Such term shall not include any dividend on any share of
stock with respect to which the holding period requirements of
section 246(c) are not met or to the extent that the taxpayer
is under an obligation (whether pursuant to a short sale or
otherwise) to make related payments with respect to positions
in substantially similar or related property.''.
(4) Conforming amendments.--
(A) Section 199A(c)(1) of the Internal Revenue Code
of 1986 is amended by striking ``any qualified trade or
business'' and inserting ``all qualified trades or
businesses''.
(B) Section 199A(e) of such Code is amended by
striking paragraph (4).
(C) Section 199A(f) of such Code, as amended by
paragraph (1), is amended--
(i) by redesignating paragraphs (2) through
(5) as paragraphs (3) through (6),
respectively, and
(ii) by striking paragraph (1) and
inserting the following:
``(1) Application to partnerships and s corporations.--In
the case of a partnership or S corporation--
``(A) this section shall be applied at the partner
or shareholder level, and
``(B) each partner or shareholder shall take into
account such person's allocable share of each qualified
item of income, gain, deduction, and loss.
For purposes of this paragraph, in the case of an S
corporation, an allocable share shall be the shareholder's pro
rata share of an item.
``(2) Treatment of trades or businesses in puerto rico.--In
the case of any taxpayer with qualified business income from
sources within the commonwealth of Puerto Rico, if all such
income is taxable under section 1 for such taxable year, then
for purposes of determining the qualified business income of
such taxpayer for such taxable year, the term `United States'
shall include the Commonwealth of Puerto Rico.''.
(D) Section 199A(f)(6)(A) of such Code, as
redesignated by paragraph (1) and subparagraph (C), is
amended by striking ``and wages''.
(E) Section 199A(g)(1)(B)(ii) of such Code is
amended to read as follows:
``(ii) W-2 wages.--For purposes of this
subparagraph--
``(I) In general.--The term `W-2
wages' means, with respect to any
person for any taxable year of such
person, the amounts described in
paragraphs (3) and (8) of section
6051(a) paid by such person with
respect to employment of employees by
such person during the calendar year
ending during such taxable year. Such
amounts shall be determined after
application of subsection (b).
``(II) Return requirement.--Such
term shall not include any amount which
is not properly included in a return
filed with the Social Security
Administration on or before the 60th
day after the due date (including
extensions) for such return.
``(III) Wages must be allocable to
domestic production gross receipts.--
Such term shall not include any amount
which is not properly allocable to
domestic production gross receipts for
purposes of paragraph (3)(A).''.
(F) Section 199A(g)(5)(B) of such Code is amended
by inserting ``and the determination of W-2 wages with
respect to any qualified trade or business conduced in
Puerto Rico shall be made without regard to any
exclusion under section 3401(a)(8) for remuneration
paid for services in Puerto Rico'' after ``this
subsection''.
(G) Section 199A of such Code is amended by
striking subsection (h) and by redesignating subsection
(i) as subsection (h).
(b) Modification of Definition of Qualified Trade or Business.--
Section 199A(d) of the Internal Revenue Code of 1986 is amended to read
as follows:
``(d) Qualified Trade or Business.--For purposes of this section,
the term `qualified trade or business' means any trade or business
other than the trade or business of performing services as an
employee.''.
(c) Exclusion of Mark to Market Gain or Loss of Traders in
Securities and Commodities From Qualified Business Income.--Section
199A(c)(3)(B) of the Internal Revenue Code of 1986 is amended by
redesignating clause (vii) as clause (viii) and by inserting after
clause (vi) the following new clause:
``(vii) Any gain or loss taken into account
under section 475(f).''.
(d) Treatment of Qualified Business Income Distributed by RICs.--
(1) In general.--Section 852(b) of the Internal Revenue
Code of 1986 is amended by adding at the end the following new
paragraph:
``(10) Treatment by shareholders of qualified business
income.--
``(A) In general.--In any case in which--
``(i) a dividend is received from a
regulated investment company, and
``(ii) such company meets the requirements
of subsection (a) for the taxable year during
which it paid such dividend,
then every shareholder of such company shall treat as
qualified business income under section 199A(c) that
portion of such dividend reported by such company as
eligible for such treatment in written statements
furnished to its shareholders.
``(B) Limitation.--For purposes of subparagraph
(A), the aggregate amount which may be reported as
dividends eligible to be treated as qualified business
income under section 199A(c) shall not exceed the sum
of--
``(i) the qualified REIT dividends (as
defined in section 199A(e)) received by the
company for the taxable year, plus
``(ii) the net amount of the company's
allocable share for the taxable year of each
qualified item of income, gain, deduction, and
loss (as defined in subsection (c)(3) of
section 199A, determined after the application
of subsection (c)(4) thereof) from a publicly
traded partnership (as defined in section
7704(b)) which is not treated as a corporation
under section 7704(a).''.
(2) Conforming amendment.--Section 199A(c) of such Code is
amended by adding at the end the following new paragraph:
``(5) Treatment of certain dividends received from
regulated investment companies.--For the treatment under
paragraph (1) of certain dividends received from regulated
investment companies, see section 852(b)(10).''.
(e) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after the date of the enactment of
this Act.
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