HB10, titled the Small Business Prosperity Act of 2025, would substantially expand and make permanent the federal deduction for qualified business income under section 199A of the Internal Revenue Code. The bill increases the deduction rate from 20 percent to 43 percent for taxable years beginning after December 31, 2024, and to 47 percent for taxable years beginning after December 31, 2025. It also removes several current limitations, including the wage-based cap and the exclusion for specified service trades or businesses, so that the deduction would generally apply to any trade or business other than employment income. The bill further revises related rules for partnerships, S corporations, and cooperatives, and includes a Puerto Rico-related clarification for certain business income.
Impact
The bill would significantly change federal tax law by expanding the scope and value of the pass-through business deduction, affecting sole proprietors, partnerships, S corporations, and other qualifying businesses. It would also make the deduction permanent by striking the current sunset provision, apply the changes retroactively to taxable years beginning after December 31, 2024, and alter several conforming provisions in section 199A. In addition, HB10 would treat certain organizational restructurings as non-taxable if ownership and assets remain unchanged, and it would repeal the federal estate tax for decedents dying after December 31, 2024 while retaining basis step-up rules.
Sentiment
There is no recorded committee transcript or vote history in the provided materials, so no formal debate record is available. Based on the bill’s content and title, the measure appears strongly pro-business and pro-tax relief, especially for small businesses and pass-through entities. The overall framing suggests support for reducing tax burdens and simplifying business taxation.
Contention
The main points of likely contention are the bill’s large revenue impact, the permanent expansion of a deduction originally designed for pass-through businesses, and the repeal of the estate tax. Critics would likely focus on the distributional effects, arguing that the benefits may accrue disproportionately to higher-income business owners and estates, while supporters would emphasize small business relief, competitiveness, and tax simplification. The removal of the wage limitation and service-business exclusion may also draw scrutiny because it broadens eligibility well beyond the deduction’s current structure.
Small Business Prosperity Act of 2023 This bill modifies the tax deduction for qualified business income to (1) make such deduction permanent, (2) limit to 21% the top tax rate on qualified business income, (3) repeal the limitation on the deduction based on amount of wages paid, and (4) revise the definition of qualified trade or business to mean any trade or business other than the trade of business of performing services as an employee. The bill provides that a change in the organizational structure of a corporation is not a taxable event if there is no change among the owners, their ownership interests, or the assets of the organization, The bill repeals the estate tax after 2022.