“A bill to amend the Internal Revenue Code of 1986 to provide a payroll tax deduction for certain small businesses, and for other purposes.”
No CRS summary available for this bill.
This section establishes a new income tax deduction under IRC §177, in addition to the regular business expense deduction under §162(a)(1), for qualified small businesses equal to specified applicable amounts for each designated full-time employee (i.e., at least 30 hours per week per §4980H(c)(4)) with the lowest wages who is not a highly compensated employee (per §414(q)). (1) The maximum number of designated employees declines from 10 for taxable years beginning in 2026-2030, to 8 in 2031, 6 in 2032, 4 in 2033, and zero thereafter; (2) for each such employee, the applicable amount is the lesser of 12% of wages paid during the taxable year or a wage limitation of $8,000 for the first (maximum number minus 2) employees, $6,000 for one additional employee, and $4,000 for one additional employee. A qualified small business is a small business concern (as defined in section 3 of the Small Business Act, generally varying by industry standards) with no more than 15 full-time employees as of year-end that meets the gross receipts test of §448(c) (i.e., average annual gross receipts generally not exceeding $30 million, indexed for inflation) and certifies eligibility to the Secretary. (Thus, the deduction effectively allows qualified small businesses to deduct up to 112% of wages paid to eligible lowest-paid employees, subject to caps.) The provision applies to taxable years beginning after December 31, 2025, and terminates for taxable years beginning after December 31, 2033.