Bill Details
HR.110 - 119th Congress
Status
Latest action
2025-01-03 - Referred to the House Committee on Ways and Means.
Introduced Date
2025-01-03
Policy Area
Taxation
Committees
View committees (1)
Sponsors
8
0
0
AI Summary This summary was generated by AI from the bill text. AI can get information wrong.
This bill makes big changes to a tax break for owners of small businesses and pass-through entities (like sole proprietors, partnerships, and S corporations). It permanently expands the "qualified business income" (QBI) deduction so these business owners can exclude a much larger share of their business income from federal income tax. The change raises the deduction rate far above the current level, removes some of the rules that previously limited who could use the deduction (including limits tied to wages paid and exclusions for certain professional service businesses), and updates how the rule applies to partnerships, S corporations, and Puerto Rico income. The bill also says converting a corporation from one legal form to another is not a taxable event as long as the owners, their shares, and the assets basically stay the same. Finally, the bill repeals the federal estate tax for deaths after 2024 but keeps the tax rule that steps up the basis of inherited assets to their value at death, which affects capital gains when those assets are later sold. Most of these changes start for tax years beginning after December 31, 2024.
- The QBI deduction is made permanent and is increased from the current 20% to 43% (and to 47% for tax years beginning after December 31, 2025), expanding the tax benefit for pass-through business income.
- The bill removes the wage-based limit and the special exclusion for many service businesses, so more businesses and higher earners can claim the expanded deduction regardless of wages paid or business type.
- Corporate reorganizations that keep the same owners and assets are not treated as taxable events, and the QBI changes include technical updates for partnerships, S corporations, and Puerto Rico-source income.
- The federal estate tax is repealed for deaths after December 31, 2024, but the rule that increases the tax basis of inherited property to its value at death (basis step-up) is preserved.
Official Summaries
No summaries available
Current Full Text
[Congressional Bills 119th Congress]
[From the U.S. Government Publishing Office]
[H.R. 110 Introduced in House (IH)]
<DOC>
119th CONGRESS
1st Session
H. R. 110
To amend the Internal Revenue Code of 1986 to expand the deduction for
qualified business income, and for other purposes.
_______________________________________________________________________
IN THE HOUSE OF REPRESENTATIVES
January 3, 2025
Mr. Biggs of Arizona introduced the following bill; which was referred
to the Committee on Ways and Means
_______________________________________________________________________
A BILL
To amend the Internal Revenue Code of 1986 to expand the deduction for
qualified business income, and for other purposes.
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 Prosperity Act of
2025''.
SEC. 2. INCREASE AND EXPANSION OF DEDUCTION FOR QUALIFIED BUSINESS
INCOME.
(a) Deduction Made Permanent.--Section 199A of the Internal Revenue
Code of 1986 is amended by striking subsection (i).
(b) Deduction To Achieve a Top Rate on Qualified Business Income of
21 Percent.--Subsections (a)(2) and (b)(1)(B) of section 199A of such
Code are each amended by striking ``20 percent'' and inserting ``43
percent (47 percent in the case of any taxable year beginning after
December 31, 2025)''.
(c) Repeal of Limitation Based on W-2 Wages Paid With Respect to
the Trade or Business, Top Rate on Qualified Business Income.--Section
199A(b)(2) of such Code is amended to read as follows:
``(2) Determination of deductible amount for each trade or
business.--The amount determined under this paragraph with
respect to any qualified trade or business is 43 percent (47
percent in the case of any taxable year beginning after
December 31, 2025) of the taxpayer's qualified business income
with respect to the qualified trade or business.''.
(d) Repeal of Exclusion of Specified Service Trades or
Businesses.--Section 199A(d) of such Code 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.''.
(e) Conforming Amendments.--
(1) Section 199A(b) of such Code is amended--
(A) by striking paragraphs (3), (4), and (6), and
redesignating paragraphs (5) and (7) as paragraphs (3)
and (4), respectively, and
(B) by striking ``the lesser of--'' and all that
follows in paragraph (4) (as so redesignated) and
inserting ``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''.
(2) Section 199A(e) of such Code is amended by striking
paragraph (2).
(3) Section 199A(f)(1) of such Code is amended to read as
follows:
``(1) Application to partnerships and s corporations.--
``(A) In general.--In the case of a partnership or
S corporation--
``(i) this section shall be applied at the
partner or shareholder level, and
``(ii) 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 subparagraph, in the case of an S
corporation, an allocable share shall be the
shareholder's pro rata share of an item.
``(B) Treatment of trades or business 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.''.
(4) Section 199A(f)(4)(A) of such Code is amended by
striking ``and wages''.
(5) Section 199A(g)(1) of such Code is amended by striking
subparagraph (B) and redesignating subparagraph (C) as
subparagraph (B).
(6) Section 199A of such Code is amended by striking
subsection (h).
(f) Effective Date.--The amendments made by this section shall
apply to taxable years beginning after December 31, 2024.
SEC. 3. NO TAXABLE EVENT FOR CHANGE OF CORPORATE FORM.
Notwithstanding any provision of the Internal Revenue Code of 1986,
a change in the organizational structure of a corporation, however
organized, into another organizational structure is not a taxable event
for the purposes of such Code if there is no change among the owners,
their ownership interests, or the assets of the organization (other
than a de minimis change in such assets). The preceding sentence shall
apply to changes in organizational structure occurring after December
31, 2024.
SEC. 4. REPEAL OF ESTATE TAX AND RETENTION OF BASIS STEP-UP.
Effective for estates of decedents dying after December 31, 2024,
chapter 11 of the Internal Revenue Code of 1986 is repealed.
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