A permanent proposal

NRCA continues to fight for pro-growth policies

by Deborah Mazol

For months, Congress has discussed major reform bills costing trillions that do everything from investing in climate change initiatives to providing child tax credits. To pay for these investments, a variety of tax proposals have been announced, including some that would be detrimental to businesses. NRCA is monitoring proposed legislation and fighting for pro-growth policies that enable members to invest in their companies, create family-sustaining jobs and boost the U.S. economy.

Pass-through tax relief

As Congress continues to consider various tax proposals, NRCA continues to focus on the 20% qualified business income deduction for pass-through entities, a beneficial provision from the Tax Cuts and Jobs Act of 2017, which is set to expire in 2025. During the 2017 tax debate, these companies—mostly small businesses—were almost left out as Congress focused on reducing the overall C corporation tax rate to be more globally competitive.

NRCA and other members of the Main Street Employers Coalition led the fight to ensure parity between differently organized businesses. Unfortunately, few members of Congress understood pass-through entities or realized they were going to lower rates for C corporations while leaving pass-through entities behind. NRCA and the coalition were determined to find a champion who not only understood these issues but also was potentially willing to pull his or her support for the legislative package (which needed every Republican vote to pass).

Sen. Ron Johnson (R-Wis.) was elected in 2010 after running his own successful small business that was organized as a pass-through entity. An accountant, Johnson was acutely aware of how the proposal would disadvantage business owners in the roofing industry. He worked with NRCA and Sen. Steve Daines (R-Mont.) to include a final compromise in the bill for pass-through entities to benefit from a qualified business income deduction of 20%, otherwise known as 199A. Without this provision, 95% of U.S. businesses would not have received any tax relief and been at a significant disadvantage compared with large corporations. The maximum tax differential between C corporations and pass-through businesses would have increased from 7.7% to 23.8%. Johnson and Daines’ compromise increased the C corporation rate from 20% to 21%, and pass-through businesses received relief through a lowered maximum pass-through rate of 29.6%.

For an article related to this topic, see “Tax talk,” March 2019 issue.

Seeking permanency

NRCA is diligently working to make the 199A deduction permanent before its expiration in 2025. Through coalition efforts, the Main Street Tax Certainty Act is gaining steam. Introduced by Daines, Rep. Jason Smith (R-Mo.) and Rep. Henry Cuellar (D-Texas), the goal of the bipartisan, bicameral legislation is to offer vital support to small businesses and strengthen the economy.

As the roofing industry navigates a wild economy, the tail end of the COVID-19 pandemic, supply chain issues and workforce challenges, the 199A deduction provides resources for employers to invest in new equipment and retain employees by offering increased wages and benefits. Beyond the roofing industry, the deduction has a much broader effect on the economy. Pass-through businesses employ a majority of private sector workers (58%), so any increase in their taxes—and yours—will be detrimental.

This story is part of Rules + Regs. Click here to read additional stories from this section.

DEBORAH MAZOL is NRCA’s director of federal affairs in Washington, D.C.