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January 26, 2025

MSCI Supports Pass-Through Bill That Would Provide For Continued Tax Parity

Last week, the Metals Service Center Institute (MSCI) and more than 230 other trade associations came out in support of legislation that would make permanent the Section 199A tax deduction that was part of the 2017 Tax Cuts and Jobs Act (TCJA). This legislation, the Main Street Tax Certainty Act, was reintroduced on Jan. 23 by Sen. Steve Daines (R-Mont.) and Rep. Lloyd Smucker (R-Penn.).

As Connecting the Dots readers are aware, the goal of the 199A deduction is to encourage job creation and new investment by private businesses. Without the deduction, pass-through entities would face tax rates up to 16 percentage points higher than their publicly traded competitors. Unfortunately, unless U.S. lawmakers act, the Section 199A will expire at the end of 2025. (The reduction in the corporate tax rate, which also was enacted in 2017 at part of the TCJA, does not have an expiration date. As it did in 2017, MSCI supports reduced rates for both public and private companies regardless of whether they pay through the individual or corporate tax system.)

The letter sent last week, which is available at this link, makes the case for Section 199A permanence and notes pass-through businesses are the backbone of the U.S. economy, accounting for 95 percent of all businesses and employing 63 percent of all private sector workers, and also form the economic and social foundation for thousands of communities nationwide. If the Section 199A deduction is not made permanent, those communities would face a future of lower growth, fewer jobs, and more business closures. Indeed, a recent EY study found loss of Section 199A would put 2.6 million jobs at risk.

In contrast, making Section 199A permanent would help Main Street compete with large public corporations, lead to higher economic growth and more employment, and help prevent a significant tax hike on private companies.

Read more at this link.

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