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IRS Releases Guidance on Section 199A

by Ashley Kittrell | Aug 08, 2018
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This morning the IRS issued Section 199A regulations. As you know, this is the qualified business income deduction section that was added to the Code in the Tax Cuts and Jobs Act last fall. Tax practitioners have been waiting for this guidance from the IRS, and the AICPA and several state societies have provided comments and suggestions over the past few months. 

The IRS released three components of Section 199A guidance listed below: 

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.

There are about 200 pages of detailed guidance, which the AICPA Tax Policy and Advocacy team is currently going through. 

Their 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.)

There will be more details and analysis on the regulations in the WSCPA Short Form on August 16th. 

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