We're Working For You: Pass-Through Deductions

Did you know the Tax Cuts and Jobs Act of 2017 led to $8 billion in federal tax savings for franchises? This modernized tax code – the first in over 30 years –  has also led to increased business expansion, workforce development, wage increases, and community reinvestment; however, it's not perfect. 

The pass-through deduction in the latest tax code – or Section 199A – would improperly classify some franchise businesses as professional service entities, which would make them ineligible for the deduction. 

But have no fear, IFA is here! If you attended the Franchise Action Network Annual Meeting in September, you’ll notice that this fix in the tax code was one of the issues you discussed with your representatives on Capitol Hill. Here’s how we’re working for you: Without getting into the boring details, we’ve submitted a formal letter to the Treasury Department on October 1 explaining why franchises should not be classified as a “specialized service trade or business.” If you’re a boring details kind of person, you can find the letter we sent by clicking here, and the initial comments we submitted can be found here.

Basically, we’re working to get this clarification in the tax code fixed to make ALL FRANCHISES eligible for the deduction. If we get this clarified, it will mean MORE working capital; MORE opportunities for franchise development and MORE investment in training and support for your franchisees.

If you have any questions, please reach out to IFA’s Government Relations & Public Policy team at [email protected].

Stay tuned for an update on this issue, and thank you for your continued support as an IFA member.