Title: Main Street Fairness Act
Policy area: Taxation

Summary:
Main Street Fairness Act
This bill amends the Internal Revenue Code to prevent qualified business income attributed to individuals from being taxed at a higher rate than corporate income.
(Under current law, business income attributed to individuals is taxed using individual income tax rates rather than the corporate tax rate.)
Qualified business income is all items of income, deduction, loss, or credit properly attributable to the taxpayer from the active conduct of a trade or business, including:
Qualified business income does not include any item taken into account in determining net capital gain or the financial services income of partnerships.

[Congressional Bills 115th Congress]
[From the U.S. Government Publishing Office]
[S. 707 Introduced in Senate (IS)]

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115th CONGRESS
  1st Session
                                 S. 707

To amend the Internal Revenue Code of 1986 to ensure that pass-through 
     businesses do not pay tax at a higher rate than corporations.


_______________________________________________________________________


                   IN THE SENATE OF THE UNITED STATES

                             March 23, 2017

Ms. Collins (for herself and Mr. Nelson) 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 ensure that pass-through 
     businesses do not pay tax at a higher rate than corporations.

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

SECTION 1. SHORT TITLE.

    This Act may be cited as the ``Main Street Fairness Act''.

SEC. 2. BUSINESS INCOME OF PASS-THROUGH ENTITIES AND INDIVIDUALS.

    (a) Qualified Business Income Taxed at Corporate Rate.--Section 1 
of the Internal Revenue Code of 1986 is amended by redesignating 
subsection (i) as subsection (j) and by inserting after subsection (h) 
the following:
    ``(i) Qualified Business Income.--
            ``(1) In general.--If a taxpayer has qualified business 
        income for any taxable year, the tax imposed by this section 
        for such taxable year shall not exceed the sum of--
                    ``(A) a tax computed at the rates and in the same 
                manner as if this subsection had not been enacted on 
                the greater of--
                            ``(i) taxable income reduced by the sum of 
                        net capital gain plus qualified business 
                        income, or
                            ``(ii) the amount determined under clause 
                        (i) plus so much of qualified business income 
                        that, when added together, would not be taxed 
                        at a rate greater than the maximum rate in 
                        effect under section 11(b),
                    ``(B) tax on qualified business income reduced by 
                the amount of qualified business income on which a tax 
                is determined under subparagraph (A) (if any), 
                determined under section 11 for the taxable year by 
                treating qualified business income as taxable income of 
                a corporation, plus
                    ``(C) a tax on net capital gain, computed as if 
                subsection (h) imposed a tax on net capital gain.
            ``(2) Qualified business income defined.--For purposes of 
        this subsection--
                    ``(A) Qualified business income.--The term 
                `qualified business income' means all items of income, 
                deduction, loss, or credit properly attributable to the 
                taxpayer from the active conduct of a trade or business 
                in which--
                            ``(i) in the case of a partnership, the 
                        taxpayer holds a capital or profits interest,
                            ``(ii) in the case of an S corporation, the 
                        taxpayer is a shareholder,
                            ``(iii) in the case of a sole 
                        proprietorship or an entity otherwise 
                        disregarded as separate from its sole owner, 
                        the taxpayer is the sole owner, and
                            ``(iv) in the case of a trust or estate, 
                        the taxpayer is a beneficiary.
                    ``(B) Net capital gain.--Such term shall not 
                include any item taken into account in determining net 
                capital gain.
                    ``(C) Exception for financial services income of 
                partnerships.--In the case of a taxpayer who holds a 
                capital or profits interest in a partnership, such term 
                does not include financial services income (as defined 
                in section 904(d)(2)(D)).
            ``(3) Limitation.--Paragraph (1) shall only apply to a 
        taxable year in which the maximum rate of tax under this 
        section exceeds the maximum rate of tax under section 11.
            ``(4) Net capital gain.--For purposes of this subsection, 
        the term `net capital gain' has the meaning given to such term 
        by subsection (h).
            ``(5) Regulations.--The Secretary shall issue such 
        regulations or other guidance as may be necessary to carry out 
        the purposes of this subsection.''.
    (b) Effective Date.--The amendments made by this section shall 
apply to taxable years beginning after the date of the enactment of 
this Act.
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