The Treasury Department has announced a new measure that would allow many businesses to get around the cap on state and local tax deductions.
Congressional Republicans and the Trump administration implemented the $10,000 cap as part of their 2017 tax overhaul. But it has been met with heavy resistance from both the real estate industry and Democrats, especially in the Northeast and California, which were disproportionately affected.
Efforts to repeal it have been in vain, however.
The new proposal would allow “pass-through businesses” — a category that represents most companies in the U.S., including partnerships and S corporations — to avoid the cap, according to the Wall Street Journal. Businesses that pay corporate income tax are already exempt from the cap. Individuals are not.
“The Department of the Treasury and IRS are taking the necessary steps to provide fairness for America’s small businesses,” Treasury Secretary Steven Mnuchin said in a statement Monday.
The announcement comes as the administration edges closer to its end — which Trump has yet to acknowledge as he pursues legal challenges to the election results.
A notice issued by the department said the proposed regulations will apply to tax payments made on or after Nov. 9. Implementing regulations does not require congressional approval, but is a technical exercise that the Trump administration initially struggled to complete.
Daniel Hemel, a tax law professor at the University of Chicago, told the Journal the implications could be far-reaching.
“This makes it very easy for states to effectively exempt everyone except W-2 wage-earners from the $10,000 SALT cap,” he said. [WSJ] — Sylvia Varnham O’Regan