Enhanced Small Business Growth Act

Summary#

This bill amends section 199A of the Internal Revenue Code to change the qualified business income (QBI) deduction for certain domestic manufacturers. For taxpayers who qualify as "qualified domestic manufacturers," it increases a basic QBI percentage from 20 percent to 30 percent and replaces a different 50 percent limit with 100 percent. The bill defines a qualified domestic manufacturer as a taxpayer with at least 85 percent of its combined QBI from a "qualified domestic manufacturing trade or business." That trade or business must manufacture tangible property and at least 20 percent of the cost of goods sold (for receipts tied to that property) must be labor and overhead incurred in the United States. The bill also changes how taxable income is computed for purposes of section 199A by requiring that the computation be made without regard to section 68, without regard to any deduction under section 199A, and, if the taxpayer elects to itemize, without regard to the charitable deduction under section 170. The amendments apply to taxable years beginning after December 31, 2025.

What it means for you#

  • If your business meets the bill's tests for a "qualified domestic manufacturer," you would be eligible for a larger QBI deduction (30% instead of 20% in the cited places) and a different percentage limit (50% changed to 100% in the cited provision).
  • To qualify, at least 85% of your combined QBI must come from the defined domestic manufacturing trade or business, and at least 20% of the relevant cost of goods sold must be U.S. labor and overhead.
  • The bill also changes which deductions are ignored when computing taxable income for the QBI deduction, including ignoring section 68, deductions under section 199A, and the section 170 charitable deduction if the taxpayer itemizes.
  • The changes take effect for taxable years beginning after December 31, 2025.

Expenses#

No publicly available information on costs or revenue effects is included in the bill text.

Proponents' View#

No publicly available information.

Opponents' View#

No publicly available information.