August 15, 2018 Proposed regulations released on computing TCJA's pass-through deduction On Wednesday, August 8, 2018, the Treasury and IRS released much-anticipated proposed regulations under Section 199A (the Proposed Regulations), which provide an income tax deduction with the potential to reduce a pass-through owner's top effective tax rate to 29.6%. In addition to the Proposed Regulations under Section 199A, the IRS published Notice 2018-64, which includes a proposed revenue procedure with methods for calculating Section 199A's W-2 wage limitations, and a "FAQ" document to answer basic question on Section 199A. Among other topics, the Proposed Regulations provide: definitions that apply for purposes of Section 199A and throughout the proposed regulations themselves; computational guidance for the Section 199A deduction (Prop. Reg. Section 1.199A-1); rules to determine "W-2 wages" and the "unadjusted basis immediately after acquisition" (UBIA) of "qualified property" attributable to a trade or business (Prop. Reg. Section 1.199A-2); definitions of "qualified business income" (QBI), qualified real estate investment trust (REIT) dividends and qualified publically traded partnership (PTP) income (Prop. Reg. Section 1.199A-3); an optional trade or business aggregation rule (Prop. Reg. Section 1.199A-4); guidance on identifying the types of trades or businesses eligible and ineligible for the Section 199A deduction (Prop. Reg. Section 1.199A-5); and computational and reporting rules for relevant pass-through entities (RPEs), PTPs, trusts and estates (Prop. Reg. Section 1.199A-6). The Proposed Regulations include retroactive anti-abuse rules, including an anti-abuse rule under Section 643 relating to multiple trusts (Prop. Reg. Section 1.643(f)-1). Pending the issuance of the final regulations, the Proposed Regulations explicitly state that taxpayers may rely on the proposed Section 199A regulations until final regulations are published in the Federal Register. In addition, the Proposed Regulations indicate that certain anti-abuse rules contained in the Proposed Regulations will apply retroactively, to tax years ending after the date of the enactment of Section 199A, which is December 22, 2017.1 I. Background: Section 199A The Tax Cuts and Jobs Act (the TCJA) added to the Code new Section 199A. Section 199A generally allows non-corporate taxpayers to deduct the combined qualified business income (CQBI) amount, which is 20% of qualified business income (QBI) from a partnership, S corporation, and/or sole proprietorship that conducts business activities that are "qualified trades or businesses" (QTBs), plus 20% of qualified REIT dividends and 20% of qualified PTP income, subject to a number of limitations. The taxpayer's deduction cannot be greater than 20% of the taxpayer's taxable income (less net capital gain). For higher-income individuals, Section 199A limits amount of deductible QBI from a trade or business based on the W-2 wages paid by the trade or business, plus, in certain cases, the UBIA of qualified property used in the business (the wage and property limitation). Specifically, wage and property limitation is the greater of: (1) 50% of the W-2 wages paid with respect to the QTB; and (2) the sum of 25% of the W-2 wages with respect to the QTB plus 2.5% of the UBIA of all qualified property with respect to the QTB. The deductible QBI from a trade or business is the lesser of 20% of trade or business QBI or the wage and property limitation. The wage and property limitation does not apply to individuals with taxable income below a "threshold amount" ($315,000 if married filing jointly) and is phased in over a range (between $315,000 and $415,000 if married filing jointly). Moreover, for higher-income individuals, Section 199A excludes businesses performing certain activities, "specified service trades or businesses" (SSTBs), from the definition of QTB. Therefore, for higher-income individuals, SSTBs do not generate QBI. The rules defining an SSTB are described later. The exclusion for SSTBs does not apply to individuals with incomes below a threshold amount ($315,000 if married filing jointly) and is phased in over a range (between $315,000 and $415,000 if married filing jointly).2 For all taxpayers, the deduction allowed under Section 199A equals the lesser of: (1) the taxpayer's combined qualified business income (i.e., CQBI) amount, or (2) 20% of taxable income (reduced by net capital gain) of the taxpayer for the tax year. CQBI equals: (1) the sum of QBI amounts of each of the taxpayer's QTBs, plus (2) 20% of the taxpayer's (a) qualified REIT dividends, and (b) qualified PTP income. The computation of CQBI requires aggregating the QBI from each QTB. This, in turn, necessitates defining a trade or business for Section 199A; determining whether multiple trades or businesses or a trade or business involving both a QTB and an SSTB should be aggregated or dis-aggregated for Section 199A purposes; and then computing QBI for each appropriate grouping. QBI for a tax year means the "net amount of qualified items of income, gain, deduction and loss" from a taxpayer's QTB. For this purpose, "qualified items of income, gain, deduction and loss" must arise from the conduct of a trade or business within the US. Certain items, such as dividends, capital gain or loss, reasonable compensation paid by a qualified trade or business (including such compensation paid by an S corporation) and Section 707(c) guaranteed payments, are not treated as QBI. Furthermore, Section 199A requires a QBI loss carryforward. In the case of partnerships and S corporations, Section 199A applies at the partner or shareholder level, with each partner or shareholder taking into account its allocable share of qualified items of income, gain, deduction and loss. Each partner or shareholder also takes into account its allocable share of the W-2 wages and the UBIA of qualified property for purposes of determining the wage and property limitation. For partnerships, a partner's allocable share of these items is generally determined in the same manner as the partner's distributive share of wage and depreciation expenses. For S corporations, a shareholder's allocable share is the shareholder's pro rata share of an item.3 Section 199A is effective for tax years beginning after December 31, 2017 and before January 1, 2026.4 II. Operational rules (Prop. Reg. Section 1.199A-1) The statutory language of Section 199A left taxpayers with a number of questions regarding the terms used in the provision and how to compute the Section 199A deduction. Proposed Reg. Section 1.199A-1 provides guidance on some of these issues, defining terms used in the statute and throughout the Proposed Regulations, and offering computational guidance, including on the impact of losses on Section 199A calculations. Proposed Reg. Section 1.199A-1 also contains certain special rules that address, among other things, the impact of the Section 199A deduction on a taxpayer's basis in its partnership interest or its S corporation stock. A. Definition of trade or business Under Section 199A(b)(2), a taxpayer must determine the amount of QBI for each of its trades or businesses. Prior to the promulgation of the Proposed Regulations, the meaning of the term trade or business was subject to varying, reasonable interpretations. Prop. Reg. Section 1.199A-1 generally defines the term trade or business to mean "a Section 162 trade or business other than the trade or business of performing services as an employee." Under the Proposed Regulations, the term trade or business also includes the rental or licensing of tangible or intangible property that does not rise to the level of a Section 162 trade or business, provided that the property is rented or licensed to a trade or business that is commonly controlled. Implications: The definition of trade or business in the Proposed Regulations does not provide an interpretive rule or a bright line test for determining activities that constitute a trade or business for purposes of Section 199A. The Preamble to the Proposed Regulations states that the Section 162(a) provides the most appropriate definition of a trade or business, and references a large body of case law and administrative guidance. Section 162(a), however, does not provide a definition of trade or business. Case law and administrative guidance generally follows CIR v. Groetzinger,5 which characterizes a trade or business as an activity engaged in with continuity and regularity and with an income or profit motive but notes that the term is not defined in the Code and the determination requires a factual inquiry. Therefore, for purposes of Section 199A, the identification of a trade or business will rest on an examination of the facts in each case. B. Definition of relevant passthrough entity The Proposed Regulations create the term "relevant passthrough entity" (i.e., RPE). An RPE is generally a partnership (other than a PTP) or an S corporation that is owned, directly or indirectly, by at least one individual, estate or trust. A trust or estate would be treated as an RPE to the extent it passes through QBI, W-2 wages, UBIA of qualified property, qualified REIT dividends, or qualified PTP income. In essence, if ownership of an entity may allow the owner a Section 199A deduction, the entity would be an RPE. Implications: The Proposed Regulations do not include regulated investment companies (defined in Section 851) and common trust funds (defined in Section 584) in the definition of RPE. It is unclear whether the omission of these two entities was intentional. C. Computational guidance: In general The Proposed Regulations provide guidance for individuals with taxable income not exceeding the threshold amount ($315,000 if married filing jointly)6 and for individuals with taxable income exceeding the threshold amount. For individuals with taxable income exceeding the taxable income threshold amount, the Proposed Regulations state that the deduction is determined by adding the "QBI component" and 20% of the combined amount of qualified REIT dividends and qualified PTP income (including the individual's share of each from RPEs), and comparing the amount to 20% of the individual's taxable income (in excess of net capital gain). The lesser of these amounts is the individual's Section 199A deduction. The term QBI component does not appear in Section 199A, but Prop. Reg. Section 1.199A-1(d)(2) provides computational rules for determining the QBI component, including ordering rules.7 D. Computational guidance: Loss carryover and netting rules Section 199A(c)(2) provides that, if net qualified business income and losses from all of a taxpayer's QTBs in a tax year is less than zero, "such amount shall be treated as a loss from a QTB in the succeeding [tax] year." The Proposed Regulations would clarify that "the portion of the individual's Section 199A deduction related to QBI is zero for the [tax] year if, after netting all QBI calculated separately for each QTB, the total QBI amount for an individual is less than zero." The negative total QBI amount would be treated as negative QBI from a separate trade or business in the succeeding tax year of the individual for purposes of Section 199A. Implications: The Proposed Regulations would clarify that net losses from qualified trades or businesses do not offset the sum of qualified REIT dividends and qualified PTP income for a given tax year. The statutory language's use of the singular term, "year," could be read to create a single year carryforward of negative total QBI. However, under the Proposed Regulations, it appears those amounts carry forward indefinitely (as those amounts would be treated as accrued in the succeeding tax year). The Proposed Regulations address when QBI from one or more trade or business is negative and QBI from one or more trade or business is positive. If an individual's QBI from at least one trade or business were less than zero, that negative amount would have to offset the QBI attributable to each QTB that produced net positive QBI in proportion to the relative amounts of QBI in the trades or businesses with positive QBI.8 When the sum of qualified REIT dividends and qualified PTP income is negative, the negative amount would be treated as zero for the tax year when computing QBI. The combined negative amount would be carried forward and used to offset the combined amount of REIT dividends and qualified PTP income of the individual in "the succeeding [tax] year." Implications: It is not clear if a combined negative amount with respect to qualified REIT dividends and qualified PTP income carries forward only for a single year. The Section 199A loss limitation and carryovers rules do not affect deductions under other Code provisions. E. Special rules: Effect of the Section 199A deduction on outside basis and adjusted stock basis The Proposed Regulations further provide that the Section 199A deduction has no effect on the adjusted basis of a partner's interest in the partnership (i.e., outside basis), the adjusted basis of a shareholder's stock in an S corporation or an S corporation's accumulated adjustments account. III. Determination of W-2 wages and unadjusted basis immediately after acquisition of qualified property (Prop. Reg. Section 1.199A-2 and Notice 2018-64) For higher-income taxpayers, the amount eligible for the 20% deduction with respect to a QTB is limited to the greater of: (1) 50% of the W-2 wages paid with respect to the QTB; and (2) the sum of 25% of the W-2 wages with respect to the QTB plus 2.5% of the UBIA of all qualified property with respect to the QTB. A. W-2 wages Section 199A(b)(4) defines W-2 wages as amounts paid with respect to employment of employees during the calendar year ending during the tax year. Amounts includable as W-2 wages only include amounts properly allocable to QBI and reported on a return filed with the Social Security Administration. The treatment of wages paid by third parties (e.g., certified professional employer organizations (PEOs) or related entities) for work performed for the trade or business was unclear. The W-2 wage rules of Prop. Reg. Section 1.199A-2 generally follow the rules under former Section 199 and provide that, in determining W-2 wages, a person may take into account any W-2 wages paid by another person and reported by the other person on Forms W-2, provided that the W-2 wages were paid to common law employees or officers of the individual or RPE for employment by the individual or RPE. The person paying the W-2 wages and reporting the W-2 wages on Forms W-2 is precluded from taking into account such wages.9 Implications: For QTBs that have few or no employees for which the QTB issues Form W-2s but use third-party payors (e.g., PEOs), the Proposed Regulations' provision allowing the inclusion of certain W-2 wages paid by others provides welcome relief. The W-2 wage rules of Prop. Reg. Section 1.199A-2 also provide computational guidance. Section 1.199A-2(a)(2) includes rules regarding allocating W-2 wages between or among one or more trades or businesses and allocating W-2 wages when a trade or business acquisition or disposition causes more than one individual or entity to be an employer of the employees of the acquired or disposed of trade or business in a calendar year.10 The Proposed Regulations also provide guidance on the computation of W-2 wages when a taxpayer has a short tax year, including a short tax year that does not include a calendar year end.11 Implications: Because the definition of W-2 wages in Section 199A refers to amounts paid "during the calendar year ending during such [tax] year," trades or businesses with a short tax year that does not include December 31 could be treated as having zero W-2 wages. The Proposed Regulations provide relief from this result. The Proposed Regulations contain rules relating to the allocation of wages to trades or businesses, and to QBI for each trade or business. The Proposed Regulations would require RPEs to allocate and report the wage expense and identify and report the associated W-2 wages to its partners or shareholders. The Proposed Regulations include a presumption that W-2 wages are zero if not determined and reported for each trade or business. B. UBIA of qualified property In determining the deductible amount for each trade or business, Section 199A(b)(2) imposes a wage and property limitation that requires determination of a trade or business' qualified property, the unadjusted basis immediately after acquisition (i.e., UBIA) of qualified property, and the depreciable period in which the UBIA of qualified property is measured. 1. Qualified property Section 199A(b)(6) defines qualified property as tangible property of a character subject to the allowance for depreciation under Section 167, "which is held by, and available for use in, the qualified trade or business at the close of the taxable year, which is used at any point during the taxable year in the production of qualified business income, and the depreciable period for which has not ended before the close of the [tax] year." Under the statute, depreciable period is defined as ending 10 years after the property was first placed in service by the taxpayer, or the last day of the last full year that the applicable recovery period applies to that property under Section 168, whichever is later. The Proposed Regulations generally reiterate the Section 199A(b)(6)(A) definition of qualified property and provide guidance on whether certain items are treated as qualified property (or separate qualified property). Prop. Reg. Section 1.199A-2(c)(1) provides that improvements made to qualified property that has already been placed in service are treated as separate qualified property, which is treated as placed in service when the improvement is placed in service. In addition, the Proposed Regulations state that basis adjustments under Sections 734(b) and 743(b) are not treated as qualified property. Furthermore, under an anti-abuse rule, property acquired at year-end would not be treated as qualified property if acquired within 60 days of the end of the tax year and disposed of within 120 days without having been used in a trade or business for at least 45 days before disposition, unless the taxpayer demonstrates that the principal purpose of the acquisition and disposition was a purpose other than increasing the Section 199A deduction. Implications: The exclusion of Section 734(b) and Section 743(b) basis adjustments from qualified property status will impact the structuring of certain partnership transactions. 2. Depreciable period The Proposed Regulations generally reiterate the Section 199A(b)(6)(B) definition of depreciable period and provides guidance regarding the placed in service date for qualified property acquired in like-kind exchanges under Section 1031 and involuntary conversions under Section 1033 (generally, the exchanged basis in the replacement property is placed in service on the date which the relinquished property was first placed in service; the excess basis in the replacement property is placed in service on the date the replacement property was first placed in service). Proposed Reg. Section 1.199A-2(c)(2) also provides special rules to determine the placed-in-service date and UBIA if an individual or RPE acquires qualified property in a transferred basis transaction (i.e., a transaction described in Section 168(i)(7)(B), such as a Section 721 contribution to a partnership or a Section 351 contribution to a corporation). Under these rules, the UBIA of qualified property acquired in such a transaction would be decreased to the adjusted tax basis of the property at the time of transfer. However, the transferred qualified property would be treated as placed in service as of the date the transferee placed the property in service.12 The Proposed Regulations also state that the applicable recovery period for qualified property is unaffected by the additional first-year depreciation deduction allowable under Section 168. Implications: These rules may act as a disincentive for transferring qualified property with an adjusted tax less than UBIA in a Section 721 or Section 351 transaction. These rules should be considered in partnership mergers, partnership divisions and Revenue Ruling 99-5 transactions. 3. UBIA Section 199A does not define unadjusted basis or provide guidance regarding the meaning of the phrase "immediately after acquisition." Proposed Reg. Section 1.199A-2(c)(3) interprets the phrase "unadjusted basis immediately after acquisition" to mean the basis on the placed-in-service date of the property as determined under Section 1012 or other applicable Code Section. Certain adjustments are not taken into account (for example, basis reductions under the tax credit rules and the expensing of capitalized amounts under Section 179) in determining the UBIA amount, but the UBIA is reduced by the percentage of use of the property other than in the trade or business. Implications: The Proposed Regulations' interpretation of the term "immediately after acquisition" to mean the property's placed-in-service date (often a date later than the acquisition date) should allow a trade or business that improves acquired property before placing it in service to treat the improved property's basis as one asset for purposes of Section 199A. The Proposed Regulations provide that the UBIA of qualified property must be determined for each trade or business by the individual or RPE that directly conducts the trade or business before applying the aggregation rules of Prop. Reg. Section 1.199A-4. For a trade or business conducted by an RPE, the Proposed Regulations provide that a partner's or S corporation shareholder's allocable share of the UBIA of qualified property is determined in the same manner as the partner's allocable share or shareholder's pro rata share of tax depreciation. In addition, Prop. Reg. Section 1.199A-2(a)(3) provides guidance on the allocation of UBIA when the RPE holds qualified property that does not produce tax depreciation (each partner's share is based on how gain would be allocated to the partners in a hypothetical sale when Section 704(c) principles apply; each S corporation shareholder's share is based on relative share of ownership). The Proposed Regulations include a presumption that the UBIA of qualified property is zero if not determined and reported for each trade or business. Implications: For partnerships, these rules take into account Section 704(c) principles, adding another factor taxpayers may want to consider when negotiating Section 704(c) methods. IV. Qualified business income, qualified REIT dividends, qualified PTP income (Prop. Reg. Section 1.199A-3) A. QBI Section 199A(c) provides that QBI means, for any tax year, the net amount of qualified items of income, gain, deduction and loss with respect to any qualified trade or business of the taxpayer.13 These items are only qualified to the extent they are: (1) effectively connected with a US trade or business (determined generally under Section 864(c)); and (2) included or allowed in determining taxable income for the tax year. The statute did not make clear whether and to what extent a taxpayer would be required to allocate items between multiple trades or businesses. If an individual or RPE directly conducts multiple trades or businesses or has items of QBI that are properly allocable to more than one trade or business, the Proposed Regulations would clarify that those items must be allocated among the trades or businesses to which they are attributable using a reasonable method based on all the facts and circumstances.14 Implications: The Proposed Regulations do not define a reasonable method, apparently leaving taxpayers with a degree of flexibility. Section 199A(c)(3)(B) and (c)(4) provides a list of items that are not treated as qualified items of income, gain, deduction or loss for QBI purposes. Clarifying the meaning of the terms listed in the statute, the Proposed Regulations provide specific rules with respect to the inclusion/exclusion of the certain items, including the following: — Capital gains or losses. The statute excludes capital gains and losses from QBI. The treatment of Section 1231 gains and losses (i.e., gains and losses from certain involuntary conversions and the sale of certain property used in a trade or business) was unclear since such gains/losses are treated as long-term capital or ordinary (depending on the situation). Under the Proposed Regulations, capital gains and losses would be excluded from QBI, including gains and losses that are treated as capital gains or losses. Therefore, the treatment of a Section 1231 gain or loss as excluded from QBI as capital gain and loss will continue to be determined based on the facts. — Interest income "properly allocable to" a trade or business. Section 199A(c)(4)(C) provides that QBI does not include any interest income other than interest income that is properly allocable to a trade or business. The Proposed Regulations would clarify what types of interest income are not properly allocable: interest income received on working capital, reserves and similar accounts. The Preamble to the Proposed Regulations explains that those sources of interest income should not be included in QBI because that income is from assets held for investment. However, the Preamble states that interest income from accounts receivable for goods or services delivered by a QTB is QBI, as it is income received on assets acquired in the ordinary course of a trade or business. — Reasonable compensation. Section 199A(c)(4) provides that QBI does not include reasonable compensation paid to the taxpayer by any qualified trade or business of the taxpayer for services rendered with respect to the trade or business.15 Because the statute did not refer to S corporations in its exclusion of reasonable compensation from QBI, it was not clear whether the exclusion of reasonable compensation paid by any QTB extended to partnerships for purposes of Section 199A. The Proposed Regulations and preamble clarify that the reasonable compensation exclusion from QBI relates to reasonable compensation received by a shareholder from and S corporation and the rule does not apply to partners of a partnership.16 As a result, economically similar payments — made by S corporations and made by partnerships — may have different Section 199A consequences. — Section 707(a) payments for services and Section 707(c) payments. The Proposed Regulations would clarify that QBI does not include any guaranteed payment described in Section 707(c) (including payments for capital) or Section 707(a) payments paid to a partner for services rendered with respect to the trade or business (regardless of whether the partner performing the services is an individual or RPE). However, a partnership's deduction for such payments would reduce QBI if the deduction were properly allocable to the trade or business. Consequently, these rules create disincentives for treating payments as Section 707(a) payments for services and Section 707(c) payments. — Section 751 amounts. The Proposed Regulations provide that ordinary income arising from gain or loss attributable to assets of the partnership under Sections 751(a) or 751(b) is taken into account for purposes of computing QBI. — Section 481 adjustments. Under the Proposed Regulations, Section 481 adjustments arising in tax years ending after December 31, 2017 and attributable to a qualified trade or business would be taken into account for purposes of computing QBI. In addition, the statutory language does not provide specific guidance on the interaction between Section 199A and certain loss limitations rules. The Proposed Regulations provide that previously disallowed losses or deductions (including those under Sections 465, 469, 704(d), and 1366(d)) allowed in a given tax year are taken into account for purposes of computing QBI. Losses or deductions that were disallowed, suspended, limited or carried over from tax years ending before January 1, 2018, would not be taken into account in computing QBI under the Proposed Regulations. Additionally, while deductions under Section 172 for net operating losses are generally not taken into account in computing QBI, the Proposed Regulations provide that net operating losses disallowed under Section 461(l) (relating to excess business losses) are taken into account for purposes of computing QBI.17 Implications: Although the rule for suspended losses might be well intentioned from a policy perspective, the guidance in this area needs an ordering rule. To date, amounts suspended under Sections 465, 469, 704(d), and/or 1366(d) do not have yearly vintages. The rule in the Proposed Regulations does not require taxpayers to track these losses by year. The final regulations will need to provide ordering rules (e.g., FIFO, LIFO, percentage) to differentiate between suspended losses originating before 2018 and those originating after 2017. Moreover, it is not entirely clear how the rule for net operating losses disallowed under Section 461(l) operates.18 B. Qualified REIT dividends and qualified PTP income In general, the Proposed Regulations generally confirm the statutory language with respect to the definitions of qualified REIT dividends and qualified PTP income. The Proposed Regulations would exclude an otherwise qualified REIT dividend if the stock with respect to which it is received were held for fewer than 45 days (taking into account principles of Section 246(c)(3) and (4)). The Preamble to the Proposed Regulations describes this anti-abuse rule as preventing dividend stripping and similar transactions aimed at obtaining qualified REIT dividends without having economic exposure to the REIT stock for a meaningful period.19 V. Aggregation rules (Prop. Reg. Section 1.199A-4) Under the statute, the computation of CQBI requires combining the separately-computed QBI (in certain cases, as limited by W-2 wages and/or UBIA of qualified property) from each QTB. The statute does not indicate if and when multiple trades or businesses (e.g., multiple QTBs or a QTB and SSTB) may or should be grouped for Section 199A purposes. The Proposed Regulations would allow — but would not require — an individual to aggregate multiple QTBs (but not a QTB and SSTB) in limited instances. The purpose of aggregating trades or businesses is to allow the individual to treat the aggregated trades or businesses as a single trade or business for purposes of applying the wage and property limitations in calculating the QBI component. As discussed previously, Prop. Reg. Section 1.199A-1 generally incorporates the rules under Section 162 for determining whether a trade or business exists for purposes of Section 199A. The Preamble to the Proposed Regulations acknowledges that it is common for what are thought of as single trades or businesses to be operated across multiple entities for various legal, economic or other non-tax reasons. Thus, under the Proposed Regulations, individuals may aggregate businesses operated directly and the individual's share of QBI, W-2 wages, and UBIA of qualified property from trades or businesses operated through RPEs. Specifically, for aggregation to apply, an individual must satisfy several requirements described in Prop. Reg. Section1.199A-4(b)(1)(i)-(v), which reflect common ownership and indicia of a relatedness between the aggregated trades or businesses.20 Moreover, for taxpayers that choose to aggregate trades or businesses, the Proposed Regulations would require consistency in aggregation in subsequent years and include individual reporting/disclosure requirements.21 However, individuals need not aggregate all businesses eligible for aggregation. Finally, multiple owners of an RPE need not aggregate in the same manner.22 Implications: The Preamble to the Proposed Regulations explains that the Treasury Department and the IRS rejected the Section 469 rules as the means by which taxpayers can aggregate trades or businesses for purposes of applying Section 199A, a proposal made in many comment letters. The Section 199A-specific criteria under which taxpayers may aggregate limit the situations in which aggregation is available but, to the extent aggregation is allowed, provide flexibility in that individuals need not aggregate all businesses eligible for aggregation and multiple owners of an RPE need not aggregate in the same manner. VI. Specified service trades or businesses and the trade or business of performing services as an employee (Prop. Reg. Section 1.199A-5) A. SSTBs For higher-income taxpayers, the definition of a QTB excludes an SSTB. Under the statute (based, in part, on a cross-reference to Section 1202), an SSTB is any trade or business involving the performance of services in one or more of the following fields: health; law; accounting; actuarial science; performing arts; consulting; athletics; financial services; brokerage services; investment and investment management; trading; dealing in securities, partnership interests, or commodities; or any trade or business whose principal asset is the reputation or skill of one or more of its employees or owners. One of the most anticipated areas of guidance with respect to Section 199A has been the definition of an SSTB, particularly the meaning of the skill and reputation clause. Moreover, the statute left unclear the treatment of trades or businesses with both a QTB-component and an SSTB-component. 1. Enumerated SSTBs Proposed Reg. Section 1.199A-5(b) provides definitions of each of the SSTBs listed previously, and makes clear that these definitions apply for purposes of Section 199A only. Some of the definitions, including of health, performing arts and consulting, were informed, in part, by existing guidance under Sections 1202(e)(3)(A) and 448, while others were based on the ordinary meaning of the enumerated term.23 The Preamble to the Proposed Regulations explains that distinct guidance governing what constitutes an SSTB was warranted because of the differing scope, objectives and, in some respects, language of Sections 199A, 448 and 1202. Thereputation or skill of one or more employees or owners has been interpreted narrowly in the Proposed Regulations. Its application would be limited to trades or businesses in which income is earned from: (1) endorsements; (2) licensing an individual's image, likeness, name, signature, voice, trademark, or any other symbols associated with the individual's identity; or (3) receiving appearance fees or income. The preamble to the Proposed Regulations explains that the reputation or skill clause was intended to describe a narrow set of trades or businesses, not otherwise covered, in which income is received based directly on the skill and/or reputation of employees or owners. Implications: The narrow definition of the reputation or skill clause is favorable guidance. Proposed Reg. Section 1.199A-5(a)(2) describes the effect of being an SSTB. The Proposed Regulation provides that, if a trade or business is an SSTB, no QBI, W-2 wages, or UBIA of qualified property is taken into account by individuals with taxable income exceeding the phase-in range, even if the item is derived from a non-SSTB activity. Furthermore, the Proposed Regulations state that a direct or indirect owner of an SSTB is engaged in the performance of the specified service for purposes of Section 199A regardless of whether the owner is passive or participated in the specified service activity. Implications: The rule stating that a direct or indirect owner of an SSTB is engaged in the performance of the specified service for purposes of Section 199A appears to reflect the IRS's and Treasury's view that the SSTB determination is made at the activity level, not the owner level. 2. Trades or businesses with both a QTB-component and an SSTB-component: De minimis and anti-abuse rules The Proposed Regulations would clarify the treatment of trades or businesses with both a QTB-component and an SSTB-component, providing a de minimis rule and certain anti-abuse rules. As discussed previously, Prop. Reg. Section 1.199A-4 would prohibit the aggregation of a QTB and an SSTB. However, Prop. Reg. Section 1.199A-5(c)(1) provides a de minimis rule, based on trade or business gross receipts and the percentage of gross receipts attributable to an SSTB, under which a trade or business will not be considered an SSTB merely because it performs a small amount of services in an SSTB.24 The Preamble to the Proposed Regulations explains that this rule was created because the Treasury Department and the IRS believe that requiring all taxpayers to evaluate and quantify any amount of specified service activity would create administrative complexity and undue burdens for both taxpayers and the IRS. Implications: The taxpayer-friendly de minimis rule will ease taxpayer concerns that an insignificant amount of income related to SSTB activity will taint an otherwise qualified trade or business. Proposed Reg. Section 1.199A-5(c)(2) and Prop. Reg. Section 1.199A-5(c)(3) provide anti-abuse rules to prevent disaggregation of trade or business activities into separate trades or business to avoid SSTB characterization for all of the trade or business activities. Proposed Reg. Section 1.199A-5(c)(2)(i) provides that an SSTB includes any trade or business that provides 80% or more of its property or services to an SSTB if there is 50% or more common ownership (directly or indirectly) of the trades or businesses. In addition, Prop. Reg. Section 1.199A-5(c)(2)(ii) provides that, if a trade or business provides less than 80% of its property or services to an SSTB and there is a 50% or more common ownership of the trades or businesses, the portion of the trade or business providing property or services to the SSTB is treated as part of the SSTB. Under Prop. Reg. Section 1.199A-5(c)(3), if a trade or business that would not otherwise be treated as an SSTB had 50% or more common ownership with an SSTB and shared expenses, the trade or business would be treated as incidental to the SSTB and, therefore, part of the SSTB, if the trade or business represents no more than 5% of the gross receipts of the combined businesses. Implications: The SSTB anti-abuse provisions under Prop. Reg. Section 1.199A-5(c) would substantially limit the ability of taxpayers to structure trades or business activities to avoid SSTB characterization. Even when the trade or business activity with third parties is the majority of the activity engaged in, a portion of the trade or business income will be excluded from QBI under Prop. Reg. Section 1.199A-5(c)(2)(ii) because of the trade or business' common ownership with an SSTB. The anti-abuse provision related to trades or businesses that have shared expenses with a commonly-owned SSTB (but may provide no goods or services to the SSTB) may unintentionally disadvantage start-up companies that cannot exceed the 5% of combined gross receipts threshold. B. Trade or business of being an employee For all taxpayers, a QTB excludes the trade or business of performing services as an employee. Proposed Reg. Section 1.199A-5(d) provides rules regarding classification as an employee for purposes of Section 199A. Moreover, Prop. Reg. Section 1.199A-5(d)(3)(i) presumes that, if an employer improperly treats an employee as an independent contractor or other non-employee, the improperly classified employee is still an employee for Section 199A purposes. As a result, the individual's activity will not be a QTB. The presumption is rebuttable if the individual can show that the individual is performing services in a capacity other than as an employee. VII. RPEs, PTPs, and trusts and estates (Prop. Reg. Section 1.199A-6) Proposed Reg. Section 1.199A-6 provides special computational and reporting rules for RPEs, PTPs, and trusts and estates. A. Computational and reporting rules: RPEs and PTPs Under Prop. Reg. Section 1.199A-6(b)(2), an RPE would have to determine the items necessary for individuals who own interests in the RPE to calculate their Section 199A deduction. The Proposed Regulations provide that, if an RPE fails to identify and report items on Schedule K-1 to an owner, the owner's share of positive QBI, W-2 wages, and UBIA of qualified property will be presumed to be zero. Similarly, Prop. Reg. 1.199A-6(b)(c) provides computational and reporting rules for PTPs.25 B. Computational and reporting rules: Trusts and estates Under Prop. Reg. Section 1.199A-6(d), a trust or estate computes its deduction based on the Section 199A items that are allocated to the trust or estate. An individual beneficiary takes into account any 199A items allocated from a trust or estate in calculating the deduction, in the same manner as though the items had been allocated from an RPE.26 For nongrantor trusts and estates, QBI, W-2 wages, UBIA of qualified property, qualified REIT dividends, and qualified PTP income must be allocated between the trust/estate and beneficiaries based on the proportion of the trust or estate's distributable net income (DNI) that is distributed to the beneficiaries and retained by the trust or estate. For this purpose, the trust or estate's DNI is determined without regard to Section 199A. For purposes of determining whether a trust or estate has taxable income that exceeds the threshold amount, the taxable income of a trust or estate is determined before taking into account any distribution deduction under Sections 651 or 661. The Proposed Regulations confirm that electing small business trusts (ESBTs) are entitled to the Section 199A deduction. Implications: Prop. Reg. Section 1.199A-6(d)(iv) is silent as to how to apply the threshold amount to ESBTs. Based on Treas. Reg. Section 1.641(c)-1, it appears that the "S portion" and the "non-S portion" are each entitled to their own deductions under Section 199A. It is unclear whether the S portion and non-S portion each get their own threshold amount, or whether a single threshold amount must be allocated between the S and non-S portions. Under the anti-abuse rule in Prop. Reg. Section 1.199A-6(d)(3)(v), trusts formed or funded with a significant purpose of receiving a deduction under Section 199A (e.g., to avoid the application of the wage or property limitation and/or the exclusion for SSTBs) will not be respected for purposes of Section 199A. As explained in the preamble to the Proposed Regulations, this rule was created to prevent taxpayers from circumventing the threshold amount by dividing assets among multiple trusts. VIII. Treatment of multiple trusts (Prop. Reg. Section 1.643(f)-1) Section 643(f) permits the Secretary to prescribe regulations to prevent taxpayers from establishing multiple non-grantor trusts or contributing additional capital to multiple existing non-grantor trusts in order to avoid federal income tax. Proposed Reg. Section 1.643(f)-1 would aggregate multiple trusts and treat them as a single trust for federal income tax purposes in certain circumstances.27 There is a presumption that federal income tax avoidance is a principal purpose for establishing or funding a trust if it results in a significant income tax benefit, unless there is a significant non-tax (or non-income tax) purpose that could not have been achieved without the creation of the separate trusts. Implications: Proposed Reg. Section 1.643(f)-1 is broader than Prop. Reg. Section 1.199A-6(d)(3)(v), and may prevent taxpayers from using multiple trusts to work around other limitations in the Code, such as the $10,000 state and local property tax deduction limitation. IX. State tax considerations The Proposed Regulations will have little impact for state income tax purposes in most states. This is because, under the terms of the TCJA, Section 199A does not provide for a deduction in computing federal adjusted gross income (AGI), as defined in Section 62, but instead allows the Section 199A deduction in arriving at federal taxable income (FTI), as defined in Section 63. Implications: According to a schedule prepared by the Federation of Tax Administrators (FTA) (last accessed August 13, 2018), as of January 1, 2018, in nearly every state that imposes a personal income tax, the starting point for determining "state taxable income" is federal AGI. According to FTA's schedule, only the following six states use FTI as their starting point: Colorado, Idaho, Minnesota, North Dakota, Oregon and South Carolina. Depending on each state's conformity to the TCJA (i.e., rolling or fixed-date conformity to the Code), tax policy leaders in these states generally will have to consider whether they wish to subscribe to the Section 199A deduction or whether they will legislatively decouple from it for state income tax purposes. Of these six states, Colorado and North Dakota have adopted Section 199A by virtue of rolling conformity to FTI (not AGI), with no legislative modifications proposed thus far. In addition, Oregon enacted legislation (Or. Laws 2018, Chap. 108) to require an addition to FTI equal to the amount allowable as a deduction under Section 199A, thus negating the effect of Oregon's general rolling Code conformity and its tie to the FTI starting point. The remaining three states conform to the Code on a fixed-date basis and, thus, the Section 199A deduction is not incorporated into their law until they update their conformity dates. Starting with the 2018 tax year, Idaho updated its fixed-date conformity and adopted the Code in effect on January 1, 2018, and, therefore, will conform to the federal Section 199A deduction unless decoupling language is enacted.28 Further, it is anticipated that the South Carolina legislature will conduct a special legislative session in the Fall of 2018 to consider Code conformity legislation, including whether to conform to or decouple from certain provisions of the TJCA, and it may consider how to apply the federal Section 199A deduction for South Carolina purposes, possibly retroactively to the 2018 tax year.29 In all of the other states, which generally use federal AGI as their starting point for determining state taxable income, since the Section 199A deduction is not a part of the determination of AGI, it is generally not included in the state tax base unless the state legislature chooses to specifically conform and incorporate the provision into state law. As of the date of this Tax Alert, only one such state — Iowa — has modified its tax law to provide for the Section 199A deduction consistent with Section 199A (but under which, on a scheduled basis, only an annually-increasing percentage of the federal Section 199A deduction will be allowed in arriving at state taxable income). Although not necessary, a number of states that use federal AGI as their starting point for determining state taxable income have nevertheless enacted legislation making clear that they do not conform to the Section 199A deduction. These states include Hawaii, Indiana, Kentucky, New Jersey, and Wisconsin, as well as the District of Columbia. Consequently, it appears that the benefit of the federal Section 199A deduction may not to be available in most states and even in those that use FTI as the starting point for their personal income tax. Thus, the Proposed Regulations will likely not have any direct impact on taxpayers in most states other than to be aware that the federal deduction will have to be added back or otherwise negated in the computation of a state taxpayer's state taxable income. X. Request for comments The Treasury Department and the IRS have requested comments on a number of specific topics.30 Persons who wish to provide public comments or to participate in the public hearing on October 16, 2018, must submit comments and/or a request regarding the hearing to the Treasury Department by 45 days after the publication of the Proposed Regulations in the Federal Register. Taxpayers wishing to provide comments or participate in the hearing should note the condensed timetable (a 45-day period, rather than the more usual 90-day period). XI. Conclusion The Proposed Regulations generally provide appreciated guidance for taxpayers that may be eligible for the Section 199A deduction and represent a step in the right direction. The Proposed Regulations offer taxpayers clarity regarding many of the factors needed to determine the extent to which their income is eligible for the Section 199A deduction. In particular, the Proposed Regulations contain detailed rules on the computation of the QBI amount, including rules addressing the treatment of netting the income and loss from multiple QTBs and the carryover of losses to a succeeding taxable year. The Proposed Regulations also contain detailed rules addressing the determination of W-2 wages and UBIA of qualified property, including a taxpayer-favorable rule allowing W-2 wages paid by other parties (e.g., PEOs) to be treated as the taxpayer's W-2 wages. And, perhaps most significantly, the Proposed Regulations provide detailed definitions of each enumerated SSTB and the skill and reputation clause. However, as discussed, the Proposed Regulations leave questions unanswered and, in some instances, create additional uncertainty. Moreover, the Proposed Regulations contain six anti-abuse rules, which taxpayers will need to consider when structuring transactions in light of the Section 199A deduction. For example, Prop. Reg. Section 1.199A-5(c)(2) and (c)(3) contain anti-abuse rules designed to prevent attempts to separate income into SSTB-related income and non-SSTB related income. As noted, these anti-abuse rules have a proposed effective date of December 22, 2017. Furthermore, Congress added Section 199A to the Code to minimize the difference in the individual income tax rate and the reduced corporate income tax rate as a result of the adoption of the TCJA. Section 199A and the Proposed Regulations, however, preclude many pass-through owners from qualifying for all or any amount of a Section 199A deduction, complicating choice-of-entity considerations. Taxpayers should consider modeling various scenarios under Section 199A (and other Code provisions) in evaluating their choice of entity. ———————————————
——————————————— 1 The anti-abuse rule under Prop. Reg. Section 1.643(f)-1, however, applies as of the date the Proposed Regulations are published in the Federal Register. 2 For taxpayers with taxable income above the threshold amount but within the phase-in range, the SSTB exclusion partially applies. 3 The Proposed Regulations do not provide rules on the deduction allowed under Section 199A for the domestic production activities of agricultural or horticultural cooperatives and their patrons. The Preamble to the Proposed Regulations indicated that rules will be provided in subsequent guidance. 4 The Proposed Regulations would also clarify that fiscal-year businesses generate QBI if their year ends after December 31, 2017, so long as the partner/shareholder/owner's year end begins after December 31, 2017. 5 480 U.S. 23 (1987). 6 For individuals with taxable income not exceeding the taxable income threshold amount, the Proposed Regulations state that the deduction is determined by adding 20% of the total QBI amount (the net total QBI from all trades or businesses, including QBI attributable to an SSTB) and 20% of the combined amount of qualified REIT dividends and qualified PTP income (including the individual's share of each from RPEs), and comparing the amount to 20% of the individual's taxable income (in excess of net capital gain). The lesser of these amounts is the individual's Section 199A deduction. 7 The QBI component is determined using computational rules, which apply in the following order: — Determine the SSTB exclusion — Combine QBI, W-2 wages and UBIA of qualified property for each trade or business for aggregated trades or businesses before applying the W-2 wage and property limitations — Determine the adjusted QBI by offsetting net positive QBI with net negative QBI The QBI component is separately determined for each trade or business. 8 The Proposed Regulations further provide that, for purposes of applying the wage and property limitation, the net gain or income with respect to each QTB (as offset by the apportioned losses) is the individual's QBI with respect to that QTB (and the W-2 wages and UBIA of qualified property from the QTB(s) with net losses cannot be included in determining the limitations for the QTB(s) with positive adjusted QBI). 9 On the same day the Proposed Regulations were released, the IRS issued Notice 2018-64 (Methods for Calculating W-2 Wages for Purposes of Section 199A). Notice 2018-64 contains a proposed revenue procedure, which is similar to guidance provided for similar purposes under the Section 199 guidance in Revenue Procedure 2006-47, and requires taxpayers to calculate W-2 wages using one of three methods. 10 The Proposed Regulations would allow, for acquisitions and dispositions, the W-2 wages to be allocated between employers based on the period during which the employees were employed. 11 The Proposed Regulations provide, for short tax years, that the W-2 wages for the trade or business include only those wages paid (or amounts deferred under Section 457 or elective deferrals made) during the short period. 12 However, the portion of the transferee's basis in the qualified property that exceeds the transferor's basis is treated as a separate qualified property that the transferee first placed in service on the date of the transfer. 13 QBI excludes qualified REIT dividends and qualified PTP income as both are treated as part of CQBI. 14 The same method is not required to be used for all items of income, gain, deduction, and loss, though the chosen reasonable method for each such item must be consistently applied from one tax year to another and must clearly reflect the income and expenses of each trade or business. The Proposed Regulations require that the books and records maintained for a trade or business must be consistent with any allocations under Prop. Reg. Section 1.199A-3. 15 S corporations are generally required to pay shareholder-employees "reasonable compensation for services performed" prior to making distributions with respect to shareholder-employee's stock in an S corporation but no such requirement attaches in the partnership context. 16 An S corporation's deduction for such reasonable compensation would reduce QBI if the deduction were properly allocable to the trade or business. 17 Similar rules are provided for a taxpayer's qualified PTP income. For example, if a taxpayer were allocated a distributive share of net loss from a PTP that is disallowed under the passive activity rules of Section 469, the loss would not be taken into account in QBI for the tax year. 18 For example, if an individual has a net operating loss of $600,000 from a non-SSTB, Section 461(l) will cause $100,000 to be disallowed in the current year, and subsequently convert that loss to an NOL in the following year. In this case, the regulations seem to conclude that the negative total QBI rule discussed in Part II.D will cause $500,000 to be a carryover QBI attribute, and the NOL/461(l) rule will cause the $100,000 to be treated as negative QBI in the following year — causing the taxpayer's total QBI loss next year to be $600,000. It is not clear what happens when the taxpayer has a QBI loss of $400,000 and a non-QBI loss of $200,000. The rule will need to be clarified to determine. 19 As discussed previously, Prop. Reg. Section 1.199A-1 provides rules regarding the impact of REIT dividends and qualified PTP income on CBQI. 20 First, the same person, or group of persons, must directly or indirectly own a majority interest in each of the businesses to be aggregated (family attribution rules apply for purposes of determining ownership, under the Proposed Regulations). Second, the majority ownership must exist for the majority of the tax year in which the items attributable to each trade or business are included in income. Under the Proposed Regulations, the taxpayer need not be the person (or a member of the group of persons) holding majority ownership (i.e., non-majority owners may aggregate). Third, none of the aggregated trades or businesses may be an SSTB (however, Prop. Reg. Section 1.199A-5, discussed later, may disregard de minimis levels of SSTB activity conducted by a QTB). Fourth, two of three enumerated factors demonstrating that the businesses are in fact part of a larger, integrated trade or business must exist (the trades or businesses provide products and services that are the same or customarily offered together; the trades or businesses share facilities or significant centralized business elements; the trades or businesses are operated in coordination with, or reliance upon, one or more of the businesses in the aggregated group). 21 For taxpayers who do not follow the reporting/disclosure requirements, the Commissioner may disaggregate trades or businesses. 22 The preamble to the Proposed Regulations indicates that the Treasury Department and the IRS are considering whether to allow aggregation by an RPE in a tiered structure. 23 Notable guidance on the definition of enumerated SSTBs include: — Health: Services in the field of health are limited to services by healthcare professionals (including veterinarians) who provide medical services directly to patients. — Accounting: Services in the field of accounting are broader than services provided by CPAs and includes bookkeeping and tax return preparation services. — Preforming arts and athletics: Services in the field of performing arts are broader than individuals who perform in front of an audience and includes services by individuals who participate in the creation of performing arts. Similarly, services in the field of athletics is broader than individuals who perform athletics and includes services by individuals who participate in athletic competition (such as team managers). An example in the Proposed Regulations concludes that a professional sport team is an SSTB. — Consulting: Services in the field of consulting are broader than the definition under Treas. Reg. Section 1.448-1T(e)(4)(iv), which excluded lobbying activities. However, consulting that is embedded in, or ancillary to, the sale of goods or performance of services (for a QTB that is otherwise not an SSTB) is not included in the meaning of services in the field of consulting if there is no separate payment for the consulting service. — Financial services: Financial services are limited to services typically performed by financial advisors and investment bankers. The preamble to the Proposed Regulations explains that the Treasury Department and the IRS agreed with commenters and excluded taking deposits and loans (i.e., banking) from SSTB treatment. — Brokerage services: Brokerage services are limited to a person that arranges transactions between a buyer and a seller with respect to securities for a commission or fee. The definition specifically excludes real estate agents and brokers and insurance agents and brokers. 24 Under this rule, a trade or business (determined before application of the aggregation rules) would not be an SSTB if, in a ta year, it has: (1) gross receipts of $25 million or less, and (2) less than 10% of the gross receipts are attributable to the performance of services in an SSTB (including performance of activities incidental to the actual performance of services). For a trade or business with gross receipts greater than $25 million, the trade or business qualifies for the de minimis rule if less than 5% of the gross receipts are attributable to the performance of services in an SSTB. 25 The Proposed Regulations provide that each PTP must determine its QBI under the rules of Prop. Reg. Section 1.199A-3 for each trade or business in which the PTP participates directly, and whether any trade or business in which the PTP participates directly is an SSTB. Each PTP must separately identify and report QBI and SSTB information on Schedule K-1 and determine and report qualified REIT dividends or qualified PTP income or loss received by the PTP (including through another PTP, a REIT or an RPE). The Proposed Regulations state that a PTP is not required to determine or report W-2 wages or the UBIA of qualified property attributable to trades or businesses in which it engages directly. 26 A trust or estate would be treated as an RPE to the extent it allocated QBI and other items to its beneficiaries, and would be treated as an individual to the extent it retained the QBI and other items. For purposes of determining whether a trust or estate has taxable income that exceeds the threshold amount, the taxable income of a trust or estate would be determined before taking into account any distribution deduction under Sections 651 or 661. 27 Specifically, the rule applies when: (1) the trusts have substantially the same grantor or grantors, (2) the trusts have substantially the same beneficiary or beneficiaries, and (3) a principal purpose for establishing the trusts or contributing additional property to the trusts is the avoidance of federal income tax. Spouses will be treated as one person for purposes of this rule. 28 During the 2018 legislative session, Section 199A addback language was considered by the Idaho legislature but not enacted. A similar measure may be considered in 2019. 29 Finally, the Minnesota legislature approved as part of an omnibus tax bill (HF 4385) provisions that would have updated the state's fixed-date Code conformity to incorporate the TCJA changes, but also would have changed Minnesota's starting point for determining state taxable income from FTI to AGI. The bill was, however, vetoed by the governor for reasons unrelated to this provision; since the conformity date has not yet been updated, Minnesota continues to not conform to the Section 199A deduction. Nevertheless, it is likely that provisions similar to those in the vetoed bill will be considered by the Minnesota legislature during the 2019 legislative session, and it could be expected that the state will likewise decouple from the Section 199A deduction through the change in the starting point for determining state taxable income. 30 Topics included, but are not limited to: the approach for apportioning losses under Prop. Reg. Section 1.199A-1(d); appropriate methods for accounting for non-recognition transactions; the interaction of Sections 199A and 461(l); whether there are situations in which it is appropriate to include Section 707(a) payments in QBI; reasonable methods for the allocation of items not clearly attributable to a single trade or business; the appropriateness of the aggregation method described in Prop. Reg. Section 1.199A-4; the proposed approach to tiered structures and the reporting necessary to allow an individual to demonstrate to which trades or businesses his or her QBI, W-2 wages, and UBIA of qualified property are attributable; and the clarity of definitions for the statutorily enumerated trades or businesses that are SSTBs. | |||||||||||||||||||||||||||||||||||||||
| |||||||||||||||||||||||||||||||||||||||
