The Internal Revenue Service (IRS) released final regulations on January 18, including new guidance under Section 199A for the 20% deduction for qualified business income (QBI). The new QBI deduction, created by the 2017 Tax Cuts and Jobs Act (TCJA) allows many owners of sole proprietorships, partnerships, S corporations, trusts or estates to deduct up to 20 percent of their qualified business income.
“Health” services are subject to significant limitations – so many owners of healthcare businesses will not fully benefit from the 20% deduction. However, in the final regulations, the IRS decided to treat skilled nursing, assisted living, and similar facilities that provide multi-faceted services to their residents as a separate category. For this category the IRS will allow a case-by-case inquiry into the facts and circumstances to determine whether the facility is mostly in the business of performing health services or would otherwise qualify for the new category because they provide housing and other non-health services. Thus, it is worthwhile for nursing homes and assisted living facilities to analyze the effect of these new regulations, including the possibility of restructuring, to help support a claim for the 20% deduction.