IRS Issues Sec. 199A Regulations

The IRS released three components of Section 199A guidance – below are links to each:

The AICPA QBI (Qualified Business Income) Task Force will be submitting comments to the IRS/Treasury, including numerous areas where the regulations requested feedback. The comment period is 45 days from the date of publication in the Federal Register, which will probably be in the next few days, and a public hearing is scheduled for October 16th.

The guidance released yesterday is about 200 pages of detail, and our Tax Policy & Advocacy team is analyzing the regulations.  Some initial observations are:

  • Multiple business entities will be able to combine into a single unit (aggregation) in order to allow owners to claim the tax deduction.  Aggregation allows for ease of administration and was one of AICPA’s recommendations.
  • Guidance includes anti-abuse rules to address strategies in which firms may attempt to spin off administrative and other services into separate entities.

De minimis rules are provided. (If a business has gross receipts of $25 million or less, the rules disregard specified service income (e.g., CPA firm income) if it is less than 10 percent of those gross receipts. For a business with more than $25 million in gross receipts, the 10 percent threshold falls to 5 percent.)

More information will be shared as it is provided.