Enhanced Small Business Growth Act of 2026
- Sponsor
- Rep. Miller, Carol D. [R-WV-1]
- Committees
- Ways and Means Committee (primary)
- Last action
- May 12, 2026
Bottom line
The bill provides a substantial tax incentive for domestic manufacturers that meet specific thresholds for U.S.-based production and labor, aiming to boost American manufacturing.
What it actually does
This bill amends Section 199A of the Internal Revenue Code of 1986 to significantly enhance the qualified business income (QBI) deduction for businesses classified as 'qualified domestic manufacturers'. It increases the deduction rate from 20% to 30% and raises the W-2 wage limitation from 50% to 100% for these specific entities. To qualify, a business must derive at least 85% of its QBI from domestic manufacturing and ensure at least 20% of its cost of goods sold for qualified receipts are attributable to U.S. labor and overhead expenses.
Proponents argue
Supporters argue that this bill will incentivize domestic manufacturing, encourage companies to keep production and jobs within the United States, and strengthen the national economy. They contend that by making it more financially attractive to manufacture tangible goods domestically, the bill will lead to increased investment, job creation, and a more resilient supply chain, particularly benefiting small and medium-sized manufacturers.
Opponents contend
Critics might argue that the bill creates a complex new carve-out in the tax code that could lead to unintended distortions in the market, favoring certain industries or business structures over others. They may also raise concerns about the potential for significant revenue loss, which could exacerbate the national debt, and question the effectiveness of such targeted tax breaks in achieving broad economic growth or job creation without clear evidence of their impact.
The bill text is short and relatively straightforward, making it accessible for a quick read and initial evaluation.
Section 2(a), amending Section 199A(j) of the Internal Revenue Code of 1986
Enhanced Qualified Business Income Deduction for Domestic Manufacturers
This provision creates a new category of taxpayer, the 'qualified domestic manufacturer,' eligible for a more generous Section 199A deduction. Instead of the standard 20% deduction, these manufacturers can deduct 30% of their qualified business income. Additionally, the limitation based on W-2 wages paid by the business is increased from 50% to 100%, meaning more of their income can qualify for the deduction, especially for businesses with high payrolls.
Supporters argue
Proponents argue that increasing the QBI deduction specifically for domestic manufacturers will provide a powerful incentive for these businesses to grow, invest in their operations, and create more jobs in the U.S. The higher wage limitation further encourages businesses to maintain and expand their American workforce.
Critics contend
Opponents might contend that this targeted tax break could disproportionately benefit larger, more established manufacturers who can more easily meet the qualification criteria, potentially creating an uneven playing field. They may also argue that such a significant increase in the deduction could lead to substantial revenue loss for the federal government.
Tradeoffs
The provision balances the goal of stimulating domestic manufacturing and job growth against the potential cost to federal revenue and the complexity of administering a highly specific tax incentive.
The bill defines 'qualified gross receipts' as those derived from the lease, rental, license, sale, exchange, or other disposition of tangible property manufactured by the business.
Section 2(a), amending Section 199A(j)(2)(B)(ii) of the Internal Revenue Code of 1986
Why it matters:This is standard legislative practice for defining terms within a new subsection of the tax code, ensuring clarity and scope.
Case for: Defining 'qualified gross receipts' precisely helps prevent abuse of the deduction by ensuring only income directly related to the manufacturing and disposition of tangible property qualifies, aligning with the bill's intent to support manufacturing.
Case against: The specificity of this definition, while necessary for precision, could inadvertently exclude certain related activities or revenue streams that are integral to a manufacturing business but do not fit the exact wording, potentially limiting the intended benefit.
Estimated impact: This definition clarifies which revenue streams are eligible for the enhanced deduction, impacting the total amount of income that can be deducted by qualifying businesses.
This section modifies how taxable income is computed for the purposes of the QBI deduction. Specifically, it states that taxable income shall be computed without regard to section 68 (limitation on itemized deductions), without regard to any deduction under section 199A itself, and for itemizers, without regard to any deduction under section 170 (charitable contributions).
Section 2(b), amending Section 199A(e)(1) of the Internal Revenue Code of 1986
Why it matters:This is standard legislative practice for ensuring the correct calculation of taxable income in relation to a specific deduction, preventing circular calculations or unintended interactions with other tax provisions.
Case for: This modification ensures that the QBI deduction is calculated based on a consistent and appropriate measure of taxable income, preventing potential double-counting of deductions or unintended interactions with other tax code sections like the itemized deduction limitation or charitable contributions.
Case against: No specific opposition is typically raised against technical amendments that clarify calculation methodologies, as they are generally seen as necessary for proper tax administration.
Estimated impact: This provision ensures the accurate and consistent application of the QBI deduction, impacting the final tax liability of all taxpayers claiming the deduction, not just domestic manufacturers.