On December 22, 2017, President Donald Trump signed into law sweeping changes to the U.S. tax code. The centerpiece of the law is a lowering of the corporate tax rate from 35% to 21%. This is a significant tax reform that will have a positive impact on many Big I" members. The law also changes tax rates for individuals and creates a special deduction for small businesses (including insurance agencies).
According to the 2016 Agency Universe Study approximately one-third of Big I" member agencies are organized as C-corporations, with the remaining two-thirds organized as entities such as Subchapter S Corporations, Partnerships and Sole Proprietorships. As such the impacts will vary depending on the individual circumstances of Big I" members. Big I" members are encouraged to consult with their accountants, lawyers and other relevant professionals related to tax and estate planning based on their individual circumstances.
One of the most important sections of the legislation creates a twenty percent (20%) tax deduction for owners and shareholders of businesses set up as pass-through entities. However, the legislation also created a phase-out related to this deduction for owners and sharehelders of certain businesses whose income exceeds prescribed thresholds. It was unclear as to whether this phase-out applied to insurance agencies. The Big "I" legislation team worked extensively with Congress and the Internal Revenue Service to seek clarification whether such deduction would apply to all insurance agencies set up as pass-through entities.
MAIA is pleased to report that pursuant to an IRS-drafted regulation finalized early in 2019, the aforementioned deduction applies to all owners and shareholders of insurance agencies set up as pass-through entities, regardless of income level.
Section 199A Basics for Big I Members (Feb. 4, 2019
What does the New 199A Tax Regulation Mean for Big I Members (Jan. 31, 2019)
Big I Final Pass-Through Regulation Webinar Recording (Jan. 30, 2019)
Big I Final Pass-Through Regulation Webinar Slides (Jan. 30, 2019)