Note: This blog post has not been updated for the Section 199A final regulations that appeared over the 2019 Martin Luther King Jr. holiday weekend. However, our “Maximizing Section 199A Deductions” ebook has been updated. We will update this blog post as soon as possible.
Normally, we don’t “do” news type blog posts. This is a how-to blog, obviously. But we rather accidentally stumbled on some news about the Section 199A proposed regulations, so it makes sense to share that information.
But let me provide the backstory.
I had found some information about the Section 199A proposed regulations being sent to the Office of Management and Budget. That notice included the names, phone numbers and emails of the attorneys drafting the regulations.
I figured it couldn’t hurt to send a polite email asking about the status. Though I didn’t expect to get a response. But then, no kidding, a few minutes later I got a call from one of the tax attorneys drafting the regulations.
Here’s what I learned…
Section 199A Proposed Regulations Sent to OMB
First, and as reported elsewhere, the Treasury has sent the proposed regulations for Section 199A to the Office of Management and Budget.
The submission appears to have occurred on July 24. And that means if the OMB does an expedited 10-day turnaround, OMB might finish its review August 3. Or August 4. (The date is a little unclear.)
It’s possible, therefore, that we might get some guidance next week. But maybe pretty unlikely.
Time to Complete Review
The problem? The OMB regulatory review process may take longer than 10 days.
Right now, for example, the RegInfo.Gov website indicates that OMB is reviewing three Treasury regulations: Two have been “in review” for less than 30 days. One of these is surely the Section 199A proposed regulations. The third Treasury regulation has been “in review” for between 31 and 60 days. That suggests this process may not move quickly enough to satisfy tax accountants and their clients.
Furthermore, very possibly the OMB’s review of Section 199A proposed regulations won’t result in a rubber-stamp, but in some back and forth and additional fine-tuning. (Those are my words, but they summarize what I was able to learn from talking briefly with the IRS tax attorney involved in the process.)
The bottomline? We may need to wait weeks and weeks… A far cry from what we all thought we heard from acting IRS commissioner David Kautter in June (see here for example).
Note: The Office of Management and Budget has reportedly been recruiting tax attorneys for just these sorts of reviews. The person I heard this from seemed to suggest it was possible they have not filled all of these positions.
Are “Draft” Proposed Regulations Available?
Because anyone reading this will surely want to know, I did ask the person I was able to talk with whether the draft Section 199A proposed regulations are available to the public.
The answer is “no.”
Multiple Waves of Section 199A Proposed Regulations?
And I may as well mention one other item.
I also asked whether or not the Internal Revenue Service will issue multiple waves of proposed regulations or other guidance for Section 199A. (This notion seems to have been suggested or deduced by some in the tax practitioner community.)
The emphatic, clear answer in response to this question? A polite “No comment.”
Maxmizing Section 199A Deductions Monograph
Probably you’re here at this blog post because you bought and downloaded a copy of our “Maximizing Sec. 199A Deductions” monograph. If that’s the case, know that we will update that monograph and send you your updated copy within a few days of when the proposed regulations become available.
On the other hand, if you’re a tax practitioner or other professional who still needs to learn how Sec. 199A works in order to serve clients, consider purchasing and downloading our Maximizing Section 199A Deductions monograph.
Other Resources You Might Find Useful
We have lots of other Section 199A related information available at this blog, too, by the way. I mention this in case you’re still learning the law.
The blog post Section 199A Phase-out Calculations describes how high income taxpayers lose the Section 199A deduction.
If you need information about how Sec. 199A deduction interacts with the optimal S corporation salary for shareholder-employees, maybe peek at this blog post: S Corporation Shareholder Salaries and the Section 199A Deduction
Determining whether a one-person business gets disqualified as a “specified service trade or business” is tricky–hopefully this will all become very clear after we get the proposed regulations–but I’ve got some additional information about that riddle here: Section 199A Pass-thru Entity Deduction and the Principal Asset Disqualification.
Finally, if you’re still learning the law, you may benefit by reading our blog’s Section 199A “primer” (available here: Pass-thru Income Deduction: Top 12 Things Every Business Must Know) and then skimming through the dozens of reader comments, questions and answers.
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