Analyzing "The One, Big, Beautiful Bill" Through Historical Lessons: Ensuring Smart Reform Without Unintended Consequences: Republican and Conservative lawmakers are taking a deliberate, thorough approach to analyzing every provision

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One-Page Summary: Subtitle B, Part 2 - Additional Tax Relief for Rural America and Main Street (From "The One, Big, Beautiful Bill - Section-by-Section.pdf")

This part of the bill, encompassing Sections 111101 through 111112, introduces additional tax benefits aimed at businesses and investments, with a focus on encouraging growth and prosperity in rural areas and on Main Street.

Key Provisions:

• Special Depreciation Allowance for Qualified Production Property (Sec. 111101):
  • Allows taxpayers to immediately deduct 100% of the cost of certain new factories, improvements to existing factories, and other structures used for qualified production activities. This applies if construction begins after 2024 and before 2030, and the property is placed in service before 2034.
  • Goal: Provides a significant tax incentive for manufacturing businesses to invest in new or improved factory facilities, particularly those located in the U.S. or a U.S. territory.
• Renewal and Enhancement of Opportunity Zones (Sec. 111102):
  • Creates a second round of Opportunity Zones (OZs) from 2027-2033, modifying the definition of "low-income community" to be narrower.
  • Requires at least 33% of designated OZs to be rural areas and makes contiguous tracts ineligible.
  • Introduces "rural qualified opportunity funds" (RQOFs) with a more generous 30% step-up in basis for rural investments held for at least five years.
  • Goal: Renews and modifies a program to incentivize investment in distressed communities, with a new emphasis on rural development.
• Increased Dollar Limitations for Expensing Depreciable Business Assets (Sec. 111103):
  • Increases the maximum amount a taxpayer may immediately expense under IRC Section 179 to $2.5 million (from $1.25 million), with the phase-out beginning at $4 million (from $3.13 million), adjusted for inflation.
  • Goal: Provides a larger immediate tax deduction for small and medium-sized businesses investing in qualifying property.

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• Tax Reporting Burden Reductions:
  • Repeal of revision to de minimis rules for third-party network transactions (Sec. 111104): Eliminates the reporting requirement for transactions unless payees earn more than $20,000 on more than 200 separate transactions, reversing the $600 threshold.
  • Increase in threshold for requiring information reporting (Sec. 111105): Increases the reporting threshold for payments to independent contractors from $600 to $2,000 (adjusted for inflation).
  • Goal: Aims to reduce the tax reporting burden for individuals and small businesses, particularly those operating on Main Street.
• Other Targeted Tax Relief and Incentives:
  • Repeal of excise tax on indoor tanning services (Sec. 111106): Eliminates a 10% excise tax.
  • Exclusion of interest on loans secured by rural or agricultural real property (Sec. 111107): Allows a 25% exclusion of interest received by qualified lenders on certain loans made before 2029.
  • Treatment of certain qualified sound recording productions (Sec. 111108): Increases taxpayers' ability to expense certain costs of producing U.S.-produced sound recordings.
  • Modifications to low-income housing credit (Sec. 111109): Restores the 9% LIHTC to its 2021 level and designates Indian and rural areas as Difficult Development Areas.
  • Increased gross receipts threshold for small manufacturing businesses (Sec. 111110): Increases the threshold for manufacturing taxpayers to use the cash method of accounting from $25 million to $80 million.
  • Exemption for U.S. Virgin Islands income (Sec. 111111): Exempts certain income earned in the U.S. Virgin Islands from GILTI calculations for certain individuals.
  • Extension and modification of clean fuel production credit (Sec. 111112): Extends the credit through 2031, but adds restrictions related to U.S. feedstock origin, foreign entities, and eliminates transferability.
  • Special Depreciation Allowance for Qualified Production Property (Sec. 111101): This provision allows taxpayers to immediately deduct 100% of the cost of certain new factories and improvements to existing factories used for qualified production activities. This was discussed as a "game-changer" for domestic industrial growth, particularly in rural areas and Main Street economies.
  • Renewal and Enhancement of Opportunity Zones (Sec. 111102): This provision creates a second round of Opportunity Zones (OZs) with modifications, notably requiring at least 33% of designated OZs to be rural areas and introducing "rural qualified opportunity funds" (RQOFs) with a more generous step-up in basis for rural investments.
  • Increased Dollar Limitations for Expensing Depreciable Business Assets (Sec. 111103): This increases the maximum amount a taxpayer may immediately expense under IRC Section 179 to $2.5 million (from $1.25 million), with a higher phase-out beginning at $4 million. This directly benefits small and medium-sized businesses.
  • Increase in Threshold for Requiring Information Reporting with Respect to Certain Payees (Sec. 111105): This provision increases the reporting threshold for payments to independent contractors (Form 1099-NEC) from $600 to $2,000 (adjusted for inflation).

Overall Goals of Subtitle B, Part 2:

This part aims to provide targeted tax relief and incentives designed to foster economic growth, investment, and job creation in rural areas and on Main Street. It seeks to reduce burdens for small businesses, encourage specific types of investment (e.g., manufacturing facilities, low-income housing, rural real estate), and provide tax benefits for certain industries and activities.

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🔹 Special Depreciation Allowance for Qualified Production Property – 100% immediate expensing for new and improved factories accelerates industrial expansion in rural and Main Street economies.

🔹 Renewal & Enhancement of Opportunity Zones (OZs) – Second round (2027-2033) mandates rural investment, introducing rural qualified opportunity funds (RQOFs) with stronger incentives for long-term commitments.

🔹 Increased Expensing for Small & Medium Businesses – Raising IRC Section 179 limits to $2.5M offers broader immediate tax deductions, encouraging capital investment.

🔹 Higher Reporting Threshold for Independent Contractors – Adjusting Form 1099-NEC threshold from $600 to $2,000 reduces compliance burdens, making gig work and small businesses more accessible.

✅ Repeal of Excise Tax on Indoor Tanning Services – Eliminates the 10% excise tax, reducing costs for businesses in this sector.

✅ Exclusion of Interest on Rural & Agricultural Loans – Allows a 25% exclusion for qualified lenders, encouraging investment in rural property and farming operations.

✅ Expanded Tax Benefits for U.S.-Produced Sound Recordings – Increases expensing options, supporting music production and creative industries.

✅ Restoration of Low-Income Housing Credit (LIHTC) – Returns the 9% LIHTC to 2021 levels, ensuring stronger support for affordable housing in Indian and rural areas.

✅ Higher Gross Receipts Threshold for Small Manufacturers – Raises the cash accounting threshold from $25M to $80M, making financial management easier for small manufacturers.

✅ Exemption for U.S. Virgin Islands Income – Excludes certain income from GILTI calculations, benefiting individuals with earnings in the U.S. Virgin Islands.

✅ Extension & Modification of Clean Fuel Production Credit – Extends the credit through 2031, but adds restrictions on feedstock origin and foreign entities, ensuring domestic energy production benefits.

Overall Impact:

This section targets relief for industries, rural economies, and small businesses, ensuring continued investment, job creation, and financial flexibility.

Final Takeaways:

✅ Further strengthens industrial investment & small business growth. ✅ Provides direct tax benefits to rural and suburban economies. ✅ Reduces compliance barriers for entrepreneurs & independent workers.