Enhanced Small Business Growth Act of 2026
HB8755, titled the Enhanced Small Business Growth Act of 2026, would amend section 199A of the Internal Revenue Code to create a larger qualified business income (QBI) deduction for certain domestic manufacturers. Under the bill, eligible taxpayers classified as “qualified domestic manufacturers” would receive a 30 percent deduction instead of the current 20 percent deduction, and the bill would also increase the applicable limitation from 50 percent to 100 percent for that category. To qualify, at least 85 percent of the taxpayer’s combined QBI must come from a domestic manufacturing trade or business, and that business must manufacture tangible property while meeting a U.S.-labor-and-overhead threshold tied to cost of goods sold.
The bill also changes how taxable income is computed for purposes of the deduction by directing that it be calculated without regard to the section 68 limitation, without regard to any deduction under section 199A itself, and, for taxpayers who itemize, without regard to charitable deductions under section 170. The amendments would apply to taxable years beginning after December 31, 2025, and the Treasury Secretary would be required to issue regulations to implement the new rules.
If enacted, HB8755 would directly amend federal tax law, specifically Internal Revenue Code section 199A, by creating a special enhanced deduction for domestic manufacturers and modifying related taxable-income calculations. The practical effect would be to lower federal income tax liability for qualifying manufacturing businesses and owners receiving pass-through income, while leaving non-qualifying businesses under the existing QBI deduction rules. The bill would also require administrative guidance from the Treasury Department to define and enforce the new domestic manufacturing standards.
Based on the available context, the bill appears to be framed positively as a pro-small-business and pro-manufacturing tax measure, with no recorded committee transcript objections or vote history in the provided materials. The title and structure suggest an emphasis on encouraging domestic production and supporting manufacturers through a larger tax deduction. Because there are no recorded votes or hearing remarks, there is no documented bipartisan or partisan sentiment in the supplied record beyond the bill’s supportive framing.
The main points of contention likely concern which businesses should qualify for the enhanced deduction and how the domestic manufacturing threshold should be measured. The bill sets a relatively specific eligibility test—85 percent of QBI from domestic manufacturing and at least 20 percent of cost of goods sold tied to U.S. labor and overhead—which could be disputed by businesses near the margin or by policymakers concerned about complexity and enforcement. Another possible point of debate is the revenue cost of expanding the deduction and whether the change would disproportionately benefit certain pass-through manufacturers over other small businesses.