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January 18, 2019

This afternoon, the U.S. Treasury and the IRS released their final regulations on the Qualified Business Income Deduction for pass-through entities under the Tax Cuts and Jobs Act. These are critically important rules for the estimated two-thirds of Council member firms that are organized as pass-throughs.

We are pleased to report that the regulations continue to include insurance agents and brokers, (as well as real estate brokers), as beneficiaries of the five-year lower tax rate, whereas other professions (such as doctors, lawyers, accountants and securities brokers) are excluded.

This is a political and substantive victory; however, we expect that there will be a continuum of beneficiaries among Council member firms. Specifically, the rules continue to place limits on the non-agency/brokerage activities within a firm. We and others had suggested safe harbors to eliminate ambiguity among separate businesses within a firm, and Treasury has declined to do so.

Meanwhile, in a change from the proposed regulations, the final regulations permit entities (tax partnerships and S corporations) to aggregate at their levels (rather than only at the individual level, as the proposed regulations required). These aggregation issues likewise will matter to many of our members.

On the opinion of allowing, but not requiring aggregation at the entity level, we can only see this as positive because it is another option. For firms that can aggregate at the entity level, it should be simpler for the individual owners to manage.

We and our legal team at Steptoe & Johnson are continuing to analyze the implications of these final rules, and we will continue to share our views with you. Of course, we urge all impacted member firms to share the final rules with their own internal and external financial experts to determine the extent to which each firm can derive benefit from these regulations.

Reporting obligations of pass-throughs were relaxed slightly. Given the length of the document, the excerpt here describes in more detail their discussion of the cut-back on the “presumption of zero.”

We will continue to digest the regulations and report back to you.

Please contact Joel Wood at, Joel Kopperud at or Blaire Bartlett at with any questions.