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OIRA review completed, final regulations under section 199A (20% deduction)

OIRA review completed, final regulations section 199A

OMB’s Office of Information and Regulatory Affairs (OIRA) today reported that it has completed review of final regulations as guidance concerning whether and to what extent an individual (including a trust or estate) is entitled to a deduction under section 199A with regard to trade or business income earned through a sole proprietorship, partnership, or S corporation. Section 199A was enacted as part of the U.S. tax law (Pub. L. No. 115-97, date of enactment December 22, 2017) that is at times referred to as the “Tax Cuts and Jobs Act” (TCJA).

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OIRA also reported today that it has completed review of proposed regulations under section 199A as guidance for RICs and REITs (regulated investment companies and real estate investment trusts).


The regulations are described on the OIRA website as follows:

  • RIN: 1545-BO71: Guidance under section 199A (computational)
    Guidance on computations necessary in computing the deduction for qualified business income of pass-thru entities under new section 199A.

  • RIN: 1545-BP12: Guidance under §199A (RIC - REIT)


Treasury regulations that are identified as “major” regulations are subject to review by OMB’s OIRA before issuance, pursuant to Executive Order 13771. Now that OIRA review of these two packages of regulations has been completed, it is expected that Treasury and the IRS will release the text of the final regulations under section 199A and text of the proposed regulations under section 199A for RICs and REITs. The timing of the release of these regulations is uncertain, but it could be as early as tomorrow, January 18, 2019.

Background

A new deduction is allowed under section 199A (added to the Code by the TCJA). The 20% deduction under section 199A generally is available for qualified business income of certain non-corporate taxpayers (including income from publicly traded partnerships and qualified REIT dividends) for tax years beginning after December 31, 2017. Eligible taxpayers can claim the 20% deduction for the first time on their 2018 federal income tax returns. 


In August 2018, Treasury and the IRS released proposed regulations under section 199A. Read KPMG’s report of initial impressions about the section 199A proposed regulations: TaxNewsFlash

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