Tax Relief Passthrough

Make Tax Relief for Passthrough (S Corporations) Entities Permanent

PIA supports making the tax deductions currently available to some independent insurance agencies that organize as passthrough entities permanent.

PIA played a key role in confirming that tax deductions for passthrough entities, which were included in the December 2017 tax reform package (P.L. 115-141), were made available to qualifying insurance agencies. The provision offered much-needed tax relief for owners of agencies that are organized as passthrough corporations by making available up to a 20 percent tax deduction for qualifying entities.

The 2017 tax reform package created a deduction for households with income from passthrough businesses—including many independent insurance agencies—that are not subject to the corporate income tax. The passthrough deduction allows individuals to exclude up to 20 percent of their passthrough business income from federal income tax. The deduction is subject to several complex conditions, based on the qualification of the passthrough business according to the Internal Revenue Service (IRS), the business owner’s taxable income for the year in question, and whether the business owner intends to file individually or jointly.

Unlike the C-corporation tax cuts also included in the 2017 package, the passthrough deduction was not made permanent in the tax law. As a result, PIA members with qualified passthroughs will no longer have access to the deduction after on December 31, 2025, unless Congress acts.

Make Tax Relief for Passthroughs Permanent

This tax benefit for passthrough entities has eased the pressure of running a small business, particularly over the last year, and has allowed insurance agency owners to invest in their agencies and improving their businesses.

For these reasons, PIA has begun to lay the groundwork to make the tax deduction permanent. We strongly support the Main Street Tax Certainty Act of 2021 (H.R. 1381/S. 480), sponsored by Representatives Jason Smith (R-MO) and Henry Cuellar (D-TX) and Senator Steve Daines (R-MT), a bill to make the 20 percent passthrough deduction permanent.

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