I understand that the Qualified Business Income deduction, introduced into law by the Tax Cuts and Job Act of 2017, is applicable at the federal level as a 20% deduction of qualified business income below threshold taxable income levels (which are stated in the first link). I am assuming that this same deduction is not applicable at the state level (however I could not find any references which categorically state this deduction is only applicable at the federal level).

Interestingly, the Tax Cuts and Jobs Act also reformed 529 plans in several key ways. For example, the legislation allows 529 plans to be used to pay for K-12 (i.e., non-higher education) tuition, which was previously NOT the case (previously only higher education expenses were allowed; see this link). In an interesting development (relevant to this question), the Nebraska state treasurer planned to ask the state legislature to introduce a bill which will align Nebraska law with federal law.

Keeping the above facts in mind, do any states have plans to introduce legislation which would enable a deduction similar to QBI, which was enabled by federal legislation?

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  • Isn't this a legislation question? Or is this Stack site more about granularity within existing laws instead of creation of laws? – David Partyka Jul 27 '18 at 14:02
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    Creation of laws is generally politics rather than law. Most of politics is the business of enacting and changing laws. This said, I've provided an answer anyway. – ohwilleke Jul 27 '18 at 14:40

do any states have plans to introduce legislation which would enable a deduction similar to QBI, which was enabled by federal legislation?

To the best of my knowledge, in a field I keep fairly close track of, no (although it is always hard to prove a negative and surely there must be some state legislator somewhere who has considered doing so).

This said, some states, such as Colorado, structure their tax codes so that the starting point of a state income tax determination is a federal taxable income, which automatically incorporates all changes in the definition of federal taxable income. Some legislators in Colorado had considered adjusting state taxable income to remove the QBI deduction for state law purposes. No legislation on this front has made serious progress, however.

It also bears mentioning that the question is somewhat flawed because "states" don't make plans to introduce legislation, even though state's do adopt legislation. Elected officials and lobbyists make plans to introduce legislation. I think what you are really asking is whether legislation to this effect has been introduced legislatively, considered legislatively, or adopted, and I have answered the question accordingly.

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