The Senate Finance Committee this week accepted a substitute version of House Bill 166, the state’s two-year main operating budget. The substitute bill made a variety of tax changes to the House-passed version — including restoring the business income tax deduction. (As previously reported, the House-passed budget bill would reduce the business income tax deduction from the current $250,000 to $100,000.)
Under the current version of the Senate’s budget bill, pass-through entities — including partnerships, LLCs, and sole proprietors — would continue to be exempt for the first $250,000 of business income. However, the current 3% flat tax rate that is imposed on business income in excess of $250,000 would go away beginning next year — and every dollar beyond the first $250,000 would be taxed at a new top rate of 4.6%.
In other actions, the Senate removed the House’s provision to exempt all manufacturers from sales-and-use tax on any supplies or janitorial services purchased to clean machinery in a manufacturing facility.
The Senate did, however, preserve the House-approved sales-and-use tax exemption for equipment and supplies used to clean equipment that produces or processes food for human consumption. The Senate also expanded the eligibility for manufacturers wanting to take advantage of the Job Retention Tax Credit (JRTC) by removing certain thresholds and requiring a new capital investment.
Please contact your state senator and thank him/her for restoring the $250,000 business income tax deduction; including eligibility expansion of the JRTC; and keeping the cleaning equipment-and-supplies tax exemption for food manufacturers in the budget bill. At the same time, urge senators to include the House-passed sales tax exemption for any supplies or janitorial services to clean manufacturing machinery — and to restore the 3% flat tax rate on business income over $250,000.
The Senate will be making more changes to the budget bill early next week. The bill must be signed no later than June 30 for the appropriations to take effect on July 1, the first day of the new state fiscal year. 6/13/2019