In a recent comment letter, WBA wrote about the proposed regulations affecting deduction for qualified business income.

Section 199A of the Tax Cuts and Jobs Act (TCJA) permits a deduction of up to 20 percent of qualified business income (QBI) from a domestic business operated by certain entities. A specified service trade or business (SSTB) is not a qualified trade or business. The definition of SSTB includes financial services, such as services provided by financial advisors, investment bankers, and wealth planners. On August 16, 2018 the Department of the Treasury proposed regulations creating a de minimis standard for classification of an SSTB.

For a trade or business with gross receipts of $25 million or less for the taxable year, a trade or business is not an SSTB if less than 10 percent of its gross receipts are attributable to the performance of services in an SSTB. For a trade or business with gross receipts of greater than $25 million for the taxable rules, a trade or business is not an SSTB if less than 5 percent of its gross receipts are attributable to the performance of services in an SSTB.

The de minimis threshold creates uncertainty whereby if all the fiduciary activities of a bank were an SSTB, bank would not meet the above threshold, potentially exempting all of the bank’s income from the benefit of the 20 percent QBI deduction. In its comments, WBA urged clarity on this point, so that Wisconsin banks could benefit from the deduction as intended by Congress.