A top House Republican confirmed Thursday that, in at least one key respect, businesses will have an advantage over individuals in the GOP's rewrite of the tax code.
House Ways and Means Committee Chairman Kevin Brady (R-Tex.) said in a letter that businesses would continue to be able to deduct the full amount of their sales and property taxes paid from their income, while individuals would partially lose their ability to do so.
The state and local tax deductions, known as SALT, have emerged as a political flash point in the House tax bill. The bill's proposal to eliminate the individual deduction for state and local income and sales taxes and cap the deduction for property taxes at $10,000 has infuriated Democrats and a group of Republicans representing districts in high-tax, high-cost-of-living areas where a large proportion of taxpayers claim the deductions.
Under the House GOP‘s Tax Cuts and Jobs Act, companies organized under “Subchapter C” of the Internal Revenue Code — which includes most of the largest U.S. companies — would be able to deduct the full complement of state and local taxes from their gross income. But there was confusion over whether other businesses — so-called pass-throughs that send their earnings to their owners to be taxed as individual income — could deduct their state and local sales and property taxes.
Rep. Earl Blumenauer (D-Ore.) pressed Brady earlier this week to clarify the matter, and other Democrats have sought to highlight the fact that businesses would continue to enjoy many deductions while most individual deductions would be eliminated or curtailed under the House GOP plan.
Brady on Thursday told Blumenauer that “taxes imposed on and paid by a pass-through business, such as sales taxes and certain property taxes, would continue to be deductible by the business, to the extent related to business property.” Those deductions tend to be claimed on Schedules C, E or F of IRS income tax returns.
However, “state and local income taxes paid by an individual owner of such a business would not be deductible on the individual's tax return,” Brady said, referring to itemized deductions claimed on Schedule A.