Some of the major provisions of last year’s tax reform legislation were the many benefits provided for businesses, including cutting the C corporation tax rate to 21%. Not to leave out other forms of business, the bill also included what was termed the 20% pass-through deduction that applies to sole proprietorships, partnerships, s-corporations and the like. The short-hand title for this tax benefit is the Sec 199A deduction, and it is one of the more complicated pieces of tax legislation ever conceived by Congress. So complicated in fact that the legislation left a lot of unanswered questions, and for the most part the tax preparation community has sat back and waited for the IRS to release regulations, hoping they would explain the many grey areas of this new deduction.

The Treasury Department and the IRS finally released the 184 page proposed regulationson August 8, 2018, explaining how they interpret and propose to apply the provisions and limitations included in the legislation. The regulations are “proposed” and the IRS is asking for feedback from stakeholders. So these are not the “final” regulations and have left some unanswered questions.