April 21, 2026
Mr. Kustoff (for himself, Mrs. Miller of West Virginia, Mr. Steube, Ms. Tenney, Mr. Carey, Mrs. Fischbach, and Mr. Moore of Utah) introduced the following bill; which was referred to the Committee on Ways and Means
To amend the Internal Revenue Code of 1986 to increase the deduction for qualified business income, and for other purposes.
Section 1. Short title
This Act may be cited as the Small Business Tax Cut Act
.
Sec. 2. Increase in deduction for qualified business income
(a) In general
Subsections (a)(2), (b)(1)(B), and (b)(2)(A) of section 199A of the Internal Revenue Code of 1986 are each amended by striking 20 percent
and inserting 23 percent
.
(b) Modification of limitations based on taxable income
(1) In general
Section 199A(b)(3) of such Code is amended to read as follows:
(3) Modification of determination of combined qualified business income amount based on taxable income
(A) Exception from limitations
In the case of any taxpayer whose taxable income for the taxable year does not exceed the threshold amount—
(i)
paragraph (2) shall be applied without regard to subparagraph (B), and
(ii)
a specified service trade or business shall not fail to be treated as a qualified trade or business solely by reason of subsection (d)(1)(A).
(B) Phase-in of limitations
In the case of any taxpayer whose taxable income for the taxable year exceeds the threshold amount, the sum described in paragraph (1)(A) (determined without regard to this subparagraph) shall instead be an amount (if greater) equal to the excess (if any) of—
(i)
the sum described in paragraph (1)(A) (determined by applying the rules of clauses (i) and (ii) of subparagraph (A)), over
(ii)
the limitation phase-in amount.
(C) Limitation phase-in amount
For purposes of subparagraph (B), the limitation phase-in amount shall be an amount equal to 75 percent of the excess (if any) of—
(i)
the taxable income of the taxpayer for the taxable year, over
(ii)
the threshold amount.
(2) Conforming amendment
Section 199A(d) of such Code is amended by striking paragraph (3).
(c) Deduction for qualified business income To apply to certain interest dividends of qualified business development companies
(1) In general
Subsections (b)(1)(B) and (c)(1) of section 199A of such Code are each amended by inserting , qualified BDC interest dividends,
after qualified REIT dividends
.
(2) Qualified BDC interest dividend defined
Section 199A(e) of such Code is amended by adding at the end the following new paragraph:
(5) Qualified BDC interest dividend
(A) In general
The term qualified BDC interest dividend means any dividend from an electing business development company received during the taxable year which is attributable to net interest income of such company which is properly allocable to a qualified trade or business of such company.
(B) Electing business development company
For purposes of this paragraph, the term electing business development company means a business development company (as defined in section 2(a) of the Investment Company Act of 1940) which has an election in effect under section 851 to be treated as a regulated investment company.
(d) Modified inflation adjustment
Section 199A(e)(2)(B) of such Code is amended—
(1)
by striking 2018
and inserting 2025
, and
(2)
in clause (ii), by striking , determined by substituting
.calendar year 2017
for calendar year 2016
in subparagraph (A)(ii) thereof
(e) Effective date
The amendments made by this section shall apply to taxable years beginning after December 31, 2026.