,,ii #aagth ,,congress #ast ,session ,s4 #bchg ,,in ,,the ,,senate ,,of ,,the ,,united ,,states ,july #bj1 #bjba,mr4 ,wyden introduced the following bill2 which was read twice and referred to the ,committee on ,finance ,a ,,bill ,to amend the ,internal ,revenue ,code of #aihf to improve the deduction for qualified business income4 #a4 ,short title ,this ,act may be cited as the ,small ,business ,tax ,fairness ,act4 #b4 ,modifications to deduction for qualified business income 7a7 ,in general 7#a7 ,eligibility 7,a7 ,deduction limited to individuals 7i7 ,in general ,section #aii;,a7a7 of the ,internal ,revenue ,code of #aihf is amended by striking ,in the case of a taxpayer other than a corporation and inserting ,in the case of an individual4 7ii7 ,application to trusts and estates ,section of such ,code is amended by adding at the end the following new subsection3 7j7 ,deduction for qualified business income ,no deduction shall be allowed under section #aii;,a to an estate or trust4 4 7,b7 ,married taxpayers must file joint return ,section #aii;,a7f7 of such ,code is amended by redesignating paragraph 7#d7 as paragraph 7#e7 and by inserting after paragraph 7#c7 the following new paragraph3 7#d7 ,no deduction for married individuals filing separate returns ,if the taxpayer is a married individual 7within the meaning of section #ggjc71 this section shall apply only if the taxpayer and the taxpayer's spouse file a joint return for the taxable year4 4 7#b7 ,amount of deduction 7,a7 ,determination of amount ,subsection 7a7 of section #aii;,a of the ,internal ,revenue ,code of #aihf is amended by striking an amount equal to the lesser of and all that follows and inserting an amount equal to #bj percent of the least of-- 7#a7 the qualified business income of the taxpayer1 7#b7 the threshold amount1 or 7#c7 the taxable income of the taxpayer for the taxable year reduced by the net capital gain 7as defined in section #a7;h77 of the taxpayer for such taxable year4 4 7,b7 ,modification of threshold amount 7i7 ,in general ,section #aii;,a7e77#b7 of the ,internal ,revenue ,code of #aihf is amended to read as follows3 7#b7 ,threshold amount ,the term threshold amount means #djj1jjj4 4 7,c7 ,limitations ,subsection 7b7 of section #aii;,a of such ,code is amended to read as follows3 7b7 ,limitations 7#a7 ,limitation based on taxable income ,the amount of the deduction allowed under subsection 7a7 7determined without regard to this paragraph7 shall be reduced 7but not below zero7 by an amount which bears the same ratio to such amount as-- 7,a7 the excess of the taxpayer's taxable income over the threshold amount1 bears to 7,b7 #ajj1jjj4 7#b7 ,special rules with respect to income received from cooperatives ,in the case of any qualified trade or business of a patron of a specified agricultural or horticultural cooperative1 the amount of qualified business income taken into account under subsection 7a77#a7 with respect to such trade or business shall be reduced by the lesser of-- 7,a7 #i percent of so much of the qualified business income with respect to such trade or business as is properly allocable to qualified payments received from such cooperative1 or 7,b7 #ej percent of so much of the ,w-#b wages 7as defined in subsection 7g77#a77 with respect to such trade or business as are so allocable4 4 7#c7 ,treatment of qualified ,,reit dividends 7,a7 ,in general ,section #aii;,a7c7 of such ,code is amended-- 7i7 by striking the last sentence in paragraph 7#a7 and inserting ,such term shall include qualified ,,reit dividends41 and 7ii7 by inserting 7other than a qualified ,,reit dividend7 after ,any dividend in paragraph 7#c77;,b77ii74 7,b7 ,technical amendment ,section #aii;,a7e77#c7 of such ,code is amended by adding at the end the following new flush sentence3 ,such term shall not include any dividend on any share of stock with respect to which the holding period requirements of section #bdf7;c7 are not met or to the extent that the taxpayer is under an obligation 7whether pursuant to a short sale or otherwise7 to make related payments with respect to positions in substantially similar or related property4 4 7#d7 ,conforming amendments 7,a7 ,section #aii;,a7c77#a7 of the ,internal ,revenue ,code of #aihf is amended by striking any qualified trade or business and inserting all qualified trades or businesses4 7,b7 ,section #aii;,a7e7 of such ,code is amended by striking paragraph 7#d74 7,c7 ,section #aii;,a7f7 of such ,code1 as amended by paragraph 7#a71 is amended-- 7i7 by redesignating paragraphs 7#b7 through 7#e7 as paragraphs 7#c7 through 7#f71 respectively1 and 7ii7 by striking paragraph 7#a7 and inserting the following3 7#a7 ,application to partnerships and ,s corporations ,in the case of a partnership or ,s corporation-- 7,a7 this section shall be applied at the partner or shareholder level1 and 7,b7 each partner or shareholder shall take into account such person's allocable share of each qualified item of income1 gain1 deduction1 and loss4 ,for purposes of this paragraph1 in the case of an ,s corporation1 an allocable share shall be the shareholder's pro rata share of an item4 7#b7 ,treatment of trades or businesses in ,puerto ,rico ,in the case of any taxpayer with qualified business income from sources within the commonwealth of ,puerto ,rico1 if all such income is taxable under section #a for such taxable year1 then for purposes of determining the qualified business income of such taxpayer for such taxable year1 the term ,united ,states shall include the ,commonwealth of ,puerto ,rico4 4 7,d7 ,section #aii;,a7f77#f77;,a7 of such ,code1 as redesignated by paragraph 7#a7 and subparagraph 7,c71 is amended by striking and wages4 7,e7 ,section #aii;,a7g77#a77;,b77ii7 of such ,code is amended to read as follows3 7ii7 ,w-#b wages ,for purposes of this subparagraph-- 7,i7 ,in general ,the term ,w-#b wages means1 with respect to any person for any taxable year of such person1 the amounts described in paragraphs 7#c7 and 7#h7 of section #fjea7;a7 paid by such person with respect to employment of employees by such person during the calendar year ending during such taxable year4 ,such amounts shall be determined after application of subsection 7b74 7,,ii7 ,return requirement ,such term shall not include any amount which is not properly included in a return filed with the ,social ,security ,administration on or before the #fjth day after the due date 7including extensions7 for such return4 7,,iii7 ,wages must be allocable to domestic production gross receipts ,such term shall not include any amount which is not properly allocable to domestic production gross receipts for purposes of paragraph 7#c77;,a74 4 7,f7 ,section #aii;,a7g77#e77;,b7 of such ,code is amended by inserting and the determination of ,w-#b wages with respect to any qualified trade or business conduced in ,puerto ,rico shall be made without regard to any exclusion under section #cdja7;a77#h7 for remuneration paid for services in ,puerto ,rico after this subsection4 7,g7 ,section #aii;,a of such ,code is amended by striking subsection 7h7 and by redesignating subsection 7i7 as subsection 7h74 7b7 ,modification of definition of qualified trade or business ,section #aii;,a7d7 of the ,internal ,revenue ,code of #aihf is amended to read as follows3 7d7 ,qualified trade or business ,for purposes of this section1 the term qualified trade or business means any trade or business other than the trade or business of performing services as an employee4 4 7c7 ,exclusion of mark to market gain or loss of traders in securities and commodities from qualified business income ,section #aii;,a7c77#c77;,b7 of the ,internal ,revenue ,code of #aihf is amended by redesignating clause 7vii7 as clause 7viii7 and by inserting after clause 7vi7 the following new clause3 7vii7 ,any gain or loss taken into account under section #dge7;f74 4 7d7 ,treatment of qualified business income distributed by ,r,i,cs 7#a7 ,in general ,section #heb7;b7 of the ,internal ,revenue ,code of #aihf is amended by adding at the end the following new paragraph3 7#aj7 ,treatment by shareholders of qualified business income 7,a7 ,in general ,in any case in which-- 7i7 a dividend is received from a regulated investment company1 and 7ii7 such company meets the requirements of subsection 7a7 for the taxable year during which it paid such dividend1 then every shareholder of such company shall treat as qualified business income under section #aii;,a7c7 that portion of such dividend reported by such company as eligible for such treatment in written statements furnished to its shareholders4 7,b7 ,limitation ,for purposes of subparagraph 7,a71 the aggregate amount which may be reported as dividends eligible to be treated as qualified business income under section #aii;,a7c7 shall not exceed the sum of-- 7i7 the qualified ,,reit dividends 7as defined in section #aii;,a7e77 received by the company for the taxable year1 plus 7ii7 the net amount of the company's allocable share for the taxable year of each qualified item of income1 gain1 deduction1 and loss 7as defined in subsection 7c77#c7 of section #aii;,a1 determined after the application of subsection 7c77#d7 thereof7 from a publicly traded partnership 7as defined in section #ggjd7;b77 which is not treated as a corporation under section #ggjd7;a74 4 7#b7 ,conforming amendment ,section #aii;,a7c7 of such ,code is amended by adding at the end the following new paragraph3 7#e7 ,treatment of certain dividends received from regulated investment companies ,for the treatment under paragraph 7#a7 of certain dividends received from regulated investment companies1 see section #heb7;b77#aj74 4 7e7 ,effective date ,the amendments made by this section shall apply to taxable years beginning after the date of the enactment of this ,act4