The Treasury Department issued its highly anticipated proposed rule to implement the Tax Cuts and Jobs Act's 20 percent tax deduction for pass-through businesses.
While the proposal heeds congressional intent and industry advocacy by allowing Subchapter S community banks to qualify for the deduction, restrictions on certain types of financial services raise questions about how it will be applied.
Citing Section 199A of the tax law, Treasury's proposed rule cites various financial services that do not qualify for the 20 percent deduction, such as wealth management and retirement planning.
Businesses that have $25 million or less in gross receipts and earn less than 10 percent of those receipts from these services would not be excluded from the deduction, nor would businesses with more than $25 million in gross receipts that earn less than 5 percent from those services.
Comments on the proposal are due 45 days after it is published in the Federal Register.