Daily Tax Report ®
Sept. 5, 2024, 5:00AM EDT
By Samantha Handler
- Deduction estimated to cost $415 billion from 2018 to 2027
- Moderate Democrats pivotal to break’s fate in 2025
A new coalition launching Thursday will target moderate Democrats in defending a key tax
break for pass-through business income.
The tax policy practice at Brownstein Hyatt Farber Schreck is forming the PROTECT
Coalition—which stands for Passthroughs Relying On Tax Equity & Championing Thriving
Businesses—to coordinate efforts for businesses reaching out to lawmakers ahead of the
2025 tax cliff. The 2017 tax law established a 20% deduction under Section 199A of the tax
code on certain pass-through income, which owners of businesses such as partnerships,
S corporations, and sole proprietors report on their individual tax returns.
That provision is set to expire at the end of 2025 without congressional action. Other
groups are ramping up their own lobbying pushes to protect the tax break.
Brownstein’s coalition will be a resource center for all businesses looking for help
articulating the benefits they’ve received from the tax break to members of Congress, and
is prioritizing bipartisan support, said Russell Sullivan, a former staff director for
Democrats on the Senate Finance Committee, who now chairs the firm’s tax policy
practice.
The group is launching now to prepare for three different scenarios that are possible after
the November election. Whether there’s full Republican control of government, a
Democratic sweep, or divided government, support from moderate Democrats will be key
in securing the future of the provision, Sullivan said.
Even if Republicans win the White House and the Senate, they will still need some
Democratic support if their majorities are narrow, he added.
“One of the reasons we’re doing this is we’re lacking in Democratic support of 199A,”
Sullivan said.
Only two House Democrats publicly support the current legislation to make the measure
permanent: Reps. Josh Gottheimer (D-N.J.) and Henry Cuellar (D-Texas).
Some critics note the tax break as tends the wealthiest. The Joint Committee on Taxation
estimated in 2018 that taxpayers in the top income tiers would see most of the benefits.
Part of the outreach effort, too, is educating members, said Rosemary Becchi, a
shareholder at Brownstein and a former Republican Senate Finance Committee tax
counsel. Several other tax breaks expire at the end of 2025, and some members may be
focused on defending other provisions.
JCT has also estimated the deduction will cost nearly $415 billion in revenue from fiscal
years 2018 to 2027, according to a separate 2018 report. The cost of the deduction may be
an issue for members from both sides of the aisle, with some wanting to ensure a 2025 tax
bill is at least partially offset.
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