Freedom for Small Businesses Act of 2019

To amend the Internal Revenue Code of 1986 to increase and expand the deduction for qualified business income. 1. Short title This Act may be cited as the Freedom for Small Businesses Act of 2019 2. Increase and expansion of deduction for qualified business income (a) Deduction made permanent Section 199A (b) Deduction To achieve a top rate on qualified business income of 21 percent Subsections (a)(2), (b)(1)(B), and (b)(2)(A) of section 199A of such Code are each amended by striking 20 percent 43 percent (47 percent in the case of any taxable year beginning after December 31, 2025) (c) Repeal of limitation based on W–2 wages paid with respect to the trade or business Section 199A(b)(2) of section 199A of such Code, as amended by subsection (a), is amended to read as follows: (2) Determination of deductible amount for each trade or business The amount determined under this paragraph with respect to any qualified trade or business is 43 percent (47 percent in the case of any taxable year beginning after December 31, 2025) of the taxpayer’s qualified business income with respect to the qualified trade or business. . (d) Repeal of exclusion of specified service trades or businesses Section 199A(d) of such Code is amended to read as follows: (d) Qualified trade or business For purposes of this section, the term qualified trade or business . (e) Conforming amendments (1) Section 199A(b) of such Code, as amended by subsection (d), is amended— (A) by striking paragraphs (3), (4), and (6), and redesignating paragraphs (5) and (7) as paragraphs (3) and (4), and (B) by the lesser of— 9 percent of so much of the qualified business income with respect to such trade or business as is properly allocable to qualified payments received from such cooperative (2) Section 199A(e) of such Code is amended by striking paragraph (2). (3) Section 199A(f)(1) of such Code is amended to read as follows: (1) Application to partnerships and s corporations (A) In general In the case of a partnership or S corporation— (i) this section shall be applied at the partner or shareholder level, and (ii) each partner or shareholder shall take into account such person's allocable share of each qualified item of income, gain, deduction, and loss. For purposes of this subparagraph, in the case of an S corporation, an allocable share shall be the shareholder’s pro rata share of an item. (B) Treatment of trades or business in Puerto Rico In the case of any taxpayer with qualified business income from sources within the commonwealth of Puerto Rico, if all such income is taxable under section 1 for such taxable year, then for purposes of determining the qualified business income of such taxpayer for such taxable year, the term United States . (4) Section 199A(f)(4)(A) of such Code is amended by striking and wages (5) Section 199A(g)(1) of such Code is amended by striking subparagraph (B) and redesignating subparagraph (C) as subparagraph (B). (6) Section 199A of such Code is amended by striking subsection (h). (f) Effective date The amendments made by this section shall apply to taxable years beginning after December 31, 2019.

Summary: Freedom for Small Businesses Act of 2019 This bill revises the tax deduction for qualified business income to (1) make such deduction permanent, (2) limit to 21% the top tax rate on qualified business income, (3) repeal the limitation on the deduction based on amount of wages paid, and (4) revise the definition of qualified trade or business to mean any trade or business other than the trade of business of performing services as an employee.