NFIB releases report detailing effects of allowing the small-business QBI tax deduction to expire

A small-business advocacy organization, the National Federation of Independent Business (NFIB), has released a new report outlining the benefits of the 20 percent Qualified Business Income (QBI) deduction for small businesses and the projected effects if it is allowed to expire.

The 20 percent QBI deduction for small businesses, a key provision of the Tax Cuts and Jobs Act of 2017, is scheduled to expire on Dec. 31, unless Congress acts to extend it.

“(The deduction) has empowered millions of small-business owners to expand, hire employees and increase wages,” the NFIB said in releasing its report. “If Congress does not act to make it permanent this year, nine out of 10 small businesses will face a significantly higher tax burden, threatening jobs and economic stability nationwide.”

The report, prepared in cooperation with national accounting firm EY, found that the 352,000 small businesses in Utah could face significantly higher taxes if Congress does not make the QBI deduction permanent this year. The report outlines the severe consequences for small businesses in Utah and the broader U.S. economy that would result from the provision’s expiration, highlighting a potential economic slowdown and increased financial strain on local businesses.

The report also highlights the contrast in tax rates between small businesses and their larger corporate competitors if the deduction is not made permanent. In Utah, the C-corp tax rate would remain at 25.55 percent, while the small-business rate would surge to 44.25 percent, the report said.

“However, making the deduction permanent would lead to significant economic benefits, leaving the small-business tax rate on a level playing field with its competitors,” the report concluded. According to the report, Utah is projected to gain 16,000 new jobs annually over the next 10 years if the deduction remains in place, including an annual GDP increase of $816 million for the first decade and $1.69 billion per year beyond 2035. (See accompanying graphic.)

“If Congress allows the 20 percent small-business deduction to expire, a massive tax hike on small businesses will take effect, stifling growth, putting the brakes on hiring and endangering countless small businesses,” said NFIB Utah State Director Casey Hill. “Small businesses don’t just create jobs — they create opportunity, innovation and strong local economies. With the deduction set to expire this year, lawmakers must act quickly to protect small businesses and the communities they support.”

The full EY report can be reviewed at the NFIB website www.nfib.com.