Why the Antipathy Toward Business Loss Deductions is Misguided
167 Tax Notes Federal 1863, 2020
8 Pages Posted: 20 Jul 2020
Date Written: June 15, 2020
In 2017, the Tax Cuts and Jobs Act added — in section 461(l) — a new limitation on an individual business owner’s ability to deduct business losses against non-business income for tax years beginning between 2018 and 2025. In March 2020, Congress temporarily suspended the operation of section 461(l) as part of the Coronavirus Aid, Relief, and Economic Security (CARES) Act. Almost immediately thereafter, there began a push—by commentators in the press and academia, and by some members of Congress — to reinstate section 461(l) and to make the rule permanent. Now, the proposed reinstatement of the rule is part of the Health and Economic Recovery Omnibus Emergency Solutions (HEROES) Act, which passed the House in May 2020. This article explains why the reinstatement of section 461(l) would be a mistake and why the provision should instead be repealed for good.
Keywords: Excess Business Loss, 461(l), CARES Act, HEROES Act, Pass-Through Entities
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