US Treasury proposes tax regulations

20 pct tax cut on pass-through businesses eyed

WASHINGTON, Aug 8, (RTRS): The US Treasury on Wednesday proposed tax regulations for a new 20 percent income tax deduction for owners of businesses organized as pass-through entities, including rules to prevent the measure from becoming a tax loophole for wealthy Americans.

Senior Treasury officials said the regulations are intended to provide everything pass-through owners need to comply with the Republican Tax Cuts and Jobs Act, a sweeping overhaul of the US tax code that President Donald Trump signed into law in December.

Most US businesses, including many small “Mom and Pop” firms, are organized as pass-through entities. Rather than operating like corporations with shareholders, as many large companies do, these businesses pass profits through to their owners as personal income.

“The pass-through deduction is an important tax cut for small and midsize businesses, reducing their effective tax rates to their lowest levels since the 1930s,” said Treasury Secretary Steven Mnuchin.

“This 20-percent deduction will lead to more investment in US companies and higher wages for hardworking Americans.”

Trump’s tax overhaul provided permanent tax relief for corporations, which saw their tax rate slashed from 35 percent to 21 percent and an end to US taxes on much of their foreign profits.

But pass-through business owners were given only temporary relief as part of the new law’s individual tax provisions, which are due to expire after 2025.

The pass-through deduction produces a tax rate of no more than 29.6 percent.

Republicans in the House of Representatives are expected to consider new legislation to make individual tax cuts permanent, with a vote possible ahead of the Nov. 6 congressional midterm elections. But such a measure is not expected to become law anytime soon.