II 

117TH CONGRESS 

1ST SESSION S. 2387 

To amend the Internal Revenue Code of 1986 to improve the deduction 

for qualified business income. 

IN THE SENATE OF THE UNITED STATES 

JULY 20, 2021 

Mr. WYDEN introduced the following bill; which was read twice and referred 

to the Committee on Finance 

A BILL 

To amend the Internal Revenue Code of 1986 to improve 

the deduction for qualified business income. 

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled, 

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Small Business Tax 

5 Fairness Act’’. 

6 SEC. 2. MODIFICATIONS TO DEDUCTION FOR QUALIFIED 

7 BUSINESS INCOME. 

8 (a) IN GENERAL.— 

9 (1) ELIGIBILITY.— 


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1 (A) DEDUCTION LIMITED TO INDIVID2 UALS.— 

3 (i) IN GENERAL.—Section 199A(a) of 

4 the Internal Revenue Code of 1986 is 

5 amended by striking ‘‘In the case of a tax6 payer other than a corporation’’ and in7 serting ‘‘In the case of an individual’’. 

8 (ii) APPLICATION TO TRUSTS AND ES9 TATES.—Section of such Code is amended 

10 by adding at the end the following new 

11 subsection: 

12 ‘‘(j) DEDUCTION FOR QUALIFIED BUSINESS IN13 COME.—No deduction shall be allowed under section 199A 

14 to an estate or trust.’’. 

15 (B) MARRIED TAXPAYERS MUST FILE

16 JOINT RETURN.—Section 199A(f) of such Code 

17 is amended by redesignating paragraph (4) as 

18 paragraph (5) and by inserting after paragraph 

19 (3) the following new paragraph: 

20 ‘‘(4) NO DEDUCTION FOR MARRIED INDIVID21 UALS FILING SEPARATE RETURNS.—If the taxpayer 

22 is a married individual (within the meaning of sec23 tion 7703), this section shall apply only if the tax24 payer and the taxpayer’s spouse file a joint return 

25 for the taxable year.’’. 


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1 (2) AMOUNT OF DEDUCTION.— 

2 (A) DETERMINATION OF AMOUNT.—Sub3 section (a) of section 199A of the Internal Rev4 enue Code of 1986 is amended by striking ‘‘an 

5 amount equal to the lesser of’’ and all that fol6 lows and inserting ‘‘an amount equal to 20 per7 cent of the least of— 

8 ‘‘(1) the qualified business income of the tax9 payer, 

10 ‘‘(2) the threshold amount, or 

11 ‘‘(3) the taxable income of the taxpayer for the 

12 taxable year reduced by the net capital gain (as de13 fined in section 1(h)) of the taxpayer for such tax14 able year.’’. 

15 (B) MODIFICATION OF THRESHOLD

16 AMOUNT.— 

17 (i) IN GENERAL.—Section 199A(e)(2) 

18 of the Internal Revenue Code of 1986 is 

19 amended to read as follows: 

20 ‘‘(2) THRESHOLD AMOUNT.—The term ‘thresh21 old amount’ means $400,000.’’. 

22 (C) LIMITATIONS.—Subsection (b) of sec23 tion 199A of such Code is amended to read as 

24 follows: 

25 ‘‘(b) LIMITATIONS.— 


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1 ‘‘(1) LIMITATION BASED ON TAXABLE IN2 COME.—The amount of the deduction allowed under 

3 subsection (a) (determined without regard to this 

4 paragraph) shall be reduced (but not below zero) by 

5 an amount which bears the same ratio to such 

6 amount as— 

7 ‘‘(A) the excess of the taxpayer’s taxable 

8 income over the threshold amount, bears to 

9 ‘‘(B) $100,000. 

10 ‘‘(2) SPECIAL RULES WITH RESPECT TO IN11 COME RECEIVED FROM COOPERATIVES.—In the case 

12 of any qualified trade or business of a patron of a 

13 specified agricultural or horticultural cooperative, 

14 the amount of qualified business income taken into 

15 account under subsection (a)(1) with respect to such 

16 trade or business shall be reduced by the lesser of— 

17 ‘‘(A) 9 percent of so much of the qualified 

18 business income with respect to such trade or 

19 business as is properly allocable to qualified 

20 payments received from such cooperative, or 

21 ‘‘(B) 50 percent of so much of the W–2 

22 wages (as defined in subsection (g)(1)) with re23 spect to such trade or business as are so allo24 cable.’’. 


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1 (3) TREATMENT OF QUALIFIED REIT DIVI2 DENDS.— 

3 (A) IN GENERAL.—Section 199A(c) of 

4 such Code is amended— 

5 (i) by striking the last sentence in 

6 paragraph (1) and inserting ‘‘Such term 

7 shall include qualified REIT dividends.’’, 

8 and 

9 (ii) by inserting ‘‘(other than a quali10 fied REIT dividend)’’ after ‘‘Any dividend’’ 

11 in paragraph (3)(B)(ii). 

12 (B) TECHNICAL AMENDMENT.—Section 

13 199A(e)(3) of such Code is amended by adding 

14 at the end the following new flush sentence: 

15 ‘‘Such term shall not include any dividend on any 

16 share of stock with respect to which the holding pe17 riod requirements of section 246(c) are not met or 

18 to the extent that the taxpayer is under an obliga19 tion (whether pursuant to a short sale or otherwise) 

20 to make related payments with respect to positions 

21 in substantially similar or related property.’’. 

22 (4) CONFORMING AMENDMENTS.— 

23 (A) Section 199A(c)(1) of the Internal 

24 Revenue Code of 1986 is amended by striking 


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1 ‘‘any qualified trade or business’’ and inserting 

2 ‘‘all qualified trades or businesses’’. 

3 (B) Section 199A(e) of such Code is 

4 amended by striking paragraph (4). 

5 (C) Section 199A(f) of such Code, as 

6 amended by paragraph (1), is amended— 

7 (i) by redesignating paragraphs (2) 

8 through (5) as paragraphs (3) through (6), 

9 respectively, and 

10 (ii) by striking paragraph (1) and in11 serting the following: 

12 ‘‘(1) APPLICATION TO PARTNERSHIPS AND S

13 CORPORATIONS.—In the case of a partnership or S 

14 corporation— 

15 ‘‘(A) this section shall be applied at the 

16 partner or shareholder level, and 

17 ‘‘(B) each partner or shareholder shall 

18 take into account such person’s allocable share 

19 of each qualified item of income, gain, deduc20 tion, and loss. 

21 For purposes of this paragraph, in the case of an S 

22 corporation, an allocable share shall be the share23 holder’s pro rata share of an item. 

24 ‘‘(2) TREATMENT OF TRADES OR BUSINESSES

25 IN PUERTO RICO.—In the case of any taxpayer with 


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1 qualified business income from sources within the 

2 commonwealth of Puerto Rico, if all such income is 

3 taxable under section 1 for such taxable year, then 

4 for purposes of determining the qualified business 

5 income of such taxpayer for such taxable year, the 

6 term ‘United States’ shall include the Common7 wealth of Puerto Rico.’’. 

8 (D) Section 199A(f)(6)(A) of such Code, 

9 as redesignated by paragraph (1) and subpara10 graph (C), is amended by striking ‘‘and wages’’. 

11 (E) Section 199A(g)(1)(B)(ii) of such 

12 Code is amended to read as follows: 

13 ‘‘(ii) W–2 WAGES.—For purposes of 

14 this subparagraph— 

15 ‘‘(I) IN GENERAL.—The term 

16 ‘W–2 wages’ means, with respect to 

17 any person for any taxable year of 

18 such person, the amounts described in 

19 paragraphs (3) and (8) of section 

20 6051(a) paid by such person with re21 spect to employment of employees by 

22 such person during the calendar year 

23 ending during such taxable year. Such 

24 amounts shall be determined after ap25 plication of subsection (b). 


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1 ‘‘(II) RETURN REQUIREMENT.— 

2 Such term shall not include any 

3 amount which is not properly included 

4 in a return filed with the Social Secu5 rity Administration on or before the 

6 60th day after the due date (including 

7 extensions) for such return. 

8 ‘‘(III) WAGES MUST BE ALLO9 CABLE TO DOMESTIC PRODUCTION

10 GROSS RECEIPTS.—Such term shall 

11 not include any amount which is not 

12 properly allocable to domestic produc13 tion gross receipts for purposes of 

14 paragraph (3)(A).’’. 

15 (F) Section 199A(g)(5)(B) of such Code is 

16 amended by inserting ‘‘and the determination of 

17 W–2 wages with respect to any qualified trade 

18 or business conduced in Puerto Rico shall be 

19 made without regard to any exclusion under 

20 section 3401(a)(8) for remuneration paid for 

21 services in Puerto Rico’’ after ‘‘this sub22 section’’. 

23 (G) Section 199A of such Code is amended 

24 by striking subsection (h) and by redesignating 

25 subsection (i) as subsection (h). 


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1 (b) MODIFICATION OF DEFINITION OF QUALIFIED

2 TRADE OR BUSINESS.—Section 199A(d) of the Internal 

3 Revenue Code of 1986 is amended to read as follows: 

4 ‘‘(d) QUALIFIED TRADE OR BUSINESS.—For pur5 poses of this section, the term ‘qualified trade or business’ 

6 means any trade or business other than the trade or busi7 ness of performing services as an employee.’’. 

8 (c) EXCLUSION OF MARK TO MARKET GAIN OR LOSS

9 OF TRADERS IN SECURITIES AND COMMODITIES FROM

10 QUALIFIED BUSINESS INCOME.—Section 199A(c)(3)(B) 

11 of the Internal Revenue Code of 1986 is amended by re12 designating clause (vii) as clause (viii) and by inserting 

13 after clause (vi) the following new clause: 

14 ‘‘(vii) Any gain or loss taken into ac15 count under section 475(f).’’. 

16 (d) TREATMENT OF QUALIFIED BUSINESS INCOME

17 DISTRIBUTED BY RICS.— 

18 (1) IN GENERAL.—Section 852(b) of the Inter19 nal Revenue Code of 1986 is amended by adding at 

20 the end the following new paragraph: 

21 ‘‘(10) TREATMENT BY SHAREHOLDERS OF

22 QUALIFIED BUSINESS INCOME.— 

23 ‘‘(A) IN GENERAL.—In any case in 

24 which— 


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1 ‘‘(i) a dividend is received from a reg2 ulated investment company, and 

3 ‘‘(ii) such company meets the require4 ments of subsection (a) for the taxable 

5 year during which it paid such dividend, 

6 then every shareholder of such company shall 

7 treat as qualified business income under section 

8 199A(c) that portion of such dividend reported 

9 by such company as eligible for such treatment 

10 in written statements furnished to its share11 holders. 

12 ‘‘(B) LIMITATION.—For purposes of sub13 paragraph (A), the aggregate amount which 

14 may be reported as dividends eligible to be 

15 treated as qualified business income under sec16 tion 199A(c) shall not exceed the sum of— 

17 ‘‘(i) the qualified REIT dividends (as 

18 defined in section 199A(e)) received by the 

19 company for the taxable year, plus 

20 ‘‘(ii) the net amount of the company’s 

21 allocable share for the taxable year of each 

22 qualified item of income, gain, deduction, 

23 and loss (as defined in subsection (c)(3) of 

24 section 199A, determined after the applica25 tion of subsection (c)(4) thereof) from a 


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1 publicly traded partnership (as defined in 

2 section 7704(b)) which is not treated as a 

3 corporation under section 7704(a).’’. 

4 (2) CONFORMING AMENDMENT.—Section 

5 199A(c) of such Code is amended by adding at the 

6 end the following new paragraph: 

7 ‘‘(5) TREATMENT OF CERTAIN DIVIDENDS RE8 CEIVED FROM REGULATED INVESTMENT COMPA9 NIES.—For the treatment under paragraph (1) of 

10 certain dividends received from regulated investment 

11 companies, see section 852(b)(10).’’. 

12 (e) EFFECTIVE DATE.—The amendments made by 

13 this section shall apply to taxable years beginning after 

14 the date of the enactment of this Act. 

Æ 


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