The U.S. House of Representatives took a step forward for small business last week by narrowly passing a major budget reconciliation package that could mark a turning point for small businesses across Pennsylvania and the nation. For members of the PA Chamber, this legislation represents a significant step forward in the fight for a more competitive, growth-oriented tax environment.
At the heart of the bill are tax reform provisions that would benefit small businesses—many of which have been long-standing priorities for the PA Chamber and its members. These reforms build on the foundation laid by the 2017 Tax Cuts and Jobs Act (TCJA), extending and enhancing key tax incentives that have helped our Commonwealth’s small businesses invest, hire, and thrive.
Key Wins for Small Business
- Permanent Extension of the Section 199A Deduction
One of the most impactful elements of the TCJA for small businesses was the Section 199A deduction, which allows pass-through entities—such as S corporations, partnerships, and sole proprietorships—to deduct up to 20 percent of their qualified business income. The new bill would make this deduction permanent, providing long-term certainty and significant tax relief for small business owners.
- Full Expensing for Capital Investments and R&D
The bill renews and makes permanent the ability for businesses to fully and immediately expense capital investments and research and development (R&D) costs. This change encourages innovation and modernization, allowing small businesses to reinvest in their operations without waiting years to recover costs through depreciation.
- Simplified Reporting Requirements
Recognizing the administrative burden that tax compliance places on small businesses, the bill raises the 1099-MISC reporting threshold from $600 to $2,000. This long-overdue update will reduce paperwork, freeing up valuable time and resources for entrepreneurs to focus on growing their businesses.
- Increased SALT Deduction Cap
For small business owners, the bill increases the state and local tax (SALT) deduction cap to $40,000 per household, with an income limit of $500,000. This change, championed by lawmakers from regions where tax rates are high, provides meaningful relief for many small business owners who file taxes as individuals.
A Pro-Growth Vision for the Future
The PA Chamber consistently advocates for policies that promote private-sector investment, job creation, and economic competitiveness. This budget reconciliation bill aligns with that vision, delivering tools that empower small businesses to operate more efficiently, expand their workforce, and compete in today’s dynamic economy.
The bill now heads to the U.S. Senate for consideration. The PA Chamber will continue to monitor developments closely and advocate for the interests of Pennsylvania’s business community every step of the way.
For small business owners navigating a complex economic landscape, this legislation offers a welcome boost—and a renewed sense of optimism for the road ahead.