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H.R. 116 (115th): Main Street Fairness Act

The text of the bill below is as of Jan 3, 2017 (Introduced).


I

115th CONGRESS

1st Session

H. R. 116

IN THE HOUSE OF REPRESENTATIVES

January 3, 2017

introduced the following bill; which was referred to the Committee on Ways and Means

A BILL

To amend the Internal Revenue Code of 1986 to ensure that pass-through businesses do not pay tax at a higher rate than corporations.

1.

Short title

This Act may be cited as the Main Street Fairness Act.

2.

Business income of pass-through entities and individuals

(a)

Qualified business income taxed at corporate rate

Section 1 of the Internal Revenue Code of 1986 is amended by redesignating subsection (i) as subjection (j) and by inserting after subsection (h) the following:

(i)

Qualified business income

(1)

In general

If a taxpayer has qualified business income for any taxable year, the tax imposed by this section for such taxable year shall not exceed the sum of—

(A)

a tax computed at the rates and in the same manner as if this subsection had not been enacted on the greater of—

(i)

taxable income reduced by the sum of net capital gain plus qualified business income, or

(ii)

the amount determined under clause (i) plus so much of qualified business income that, when added together, would not be taxed at a rate greater than the maximum rate in effect under section 11(b),

(B)

tax on qualified business income reduced by the amount of qualified business income on which a tax is determined under subparagraph (A) (if any), determined under section 11 for the taxable year by treating qualified business income as taxable income of a corporation, plus

(C)

a tax on net capital gain, computed as if subsection (h) imposed a tax on net capital gain.

(2)

Qualified business income defined

For purposes of this subsection—

(A)

Qualified business income

The term qualified business income means all items of income, deduction, loss, or credit properly attributable to the taxpayer from the active conduct of a trade or business in which—

(i)

in the case of a partnership, the taxpayer holds a capital or profits interest,

(ii)

in the case of an S corporation, the taxpayer is a shareholder,

(iii)

in the case of a sole proprietorship or an entity otherwise disregarded as separate from its sole owner, the taxpayer is the sole owner, and

(iv)

in the case of a trust or estate, the taxpayer is a beneficiary.

(B)

Net capital gain

Such term shall not include any item taken into account in determining net capital gain.

(C)

Exception for financial services income of partnerships

In the case of a taxpayer who holds a capital or profits interest in a partnership, such term does not include financial services income (as defined in section 904(d)(2)(D)).

(3)

Limitation

Paragraph (1) shall only apply to a taxable year in which the maximum rate of tax under this section exceeds the maximum rate of tax under section 11.

(4)

Net capital gain

For purposes of this subsection, the term net capital gain has the meaning given to such term by subsection (h).

(5)

Regulations

The Secretary shall issue such regulations or other guidance as may be necessary to carry out the purposes of this subsection.

.

(b)

Effective date

The amendments made by this section shall apply to taxable years beginning after the date of the enactment of this Act.