Big I Secures Important Wins as House Passes Tax Package

As reported last month, the Big “I” secured several big tax wins in the House-passed “One Big Beautiful Bill Act”. Those included stripping an entire section of the House bill that would have subjected royalty income from the licensing of a tax-exempt organization’s name or logo to UBIT, a 21% tax. Removal of this provision saved Big “I” state associations in excess of $2 million per year in potential new taxes.

Fast forward to this week and the U.S. Senate, which released text for their “One Big Beautiful Bill Act” yesterday evening. I’m pleased to report that the bill includes a provision that would subject third party litigation financing (TPLF) to a brand new tax. It will peg the tax rate for TPLF proceeds to the top ordinary income tax rate of 37%, which will ensure parity with the tax rates that plaintiffs and attorneys have to pay. Additionally, it adds a 3.8% tax for using the court system—a public good—for profit, taking the total tax rate for TPLF returns to 40.8%. Importantly, the language makes it clear that TPLF does not qualify for capital gains treatment, thereby closing the foreign TPLF tax loophole that currently allows foreign investors to pay zero in U.S. taxes. Senator Thom Tillis (R-NC) has led the charge to include this in the package.

The Big “I” has been working this hard – leading industry and broader coalition outreach to several key decision makers, including Senate Finance Committee Chair Mike Crapo (R-ID) and Senate Majority Leader John Thune (R-SD), among others. This work has been done quietly and behind the scenes for several months in an effort to not draw attention to the idea, which could have put a bullseye on it from hedge funds and the plaintiffs’ bar. It has been the ultimate inside game (a “sneak attack” if you will) and appears to have caught the TPLF community off guard. Several well timed op-eds in the Wall Street Journal and Daily Wire, placed by the Americans For Litigation Tax Fairness (A4LTF) – a group the Big “I” helped start with NAMIC – have sent the TPLF community scrambling over this past week, and that has turned to panic knowing they are now in the crosshairs of this bill.

The hard work now turns to protecting this provision from being removed from the bill. We saw what the Big “I” was able to do on the royalty UBIT issue – getting a full section of the House bill taken out – and the TPLF community is certainly calling in favors to Senators as we speak to do something similar here.

Beyond the inclusion of this TPLF provision, the Senate package makes the 199A deduction for pass-through entities permanent, while keeping it at 20% (the House-passed bill increased it to 23%). While we would certainly like to see the 20% increased, the Big “I” has said all along that making 199A permanent is the top priority. Additionally, the Senate package does not subject the aforementioned royalty income to UBIT, and does not limit or eliminate the tax exclusion for employer-sponsored health insurance.

These “wins” are by no means complete. The reconciliation package still has to compiled, considered, debated and voted upon by the full Senate. And if passed, it goes back to the House to be reconciled and passed again. We’ll remain vigilant as the process continues to play out over the coming weeks. Stay tuned!!

We hope you have received your 2025 PAC letters in the mail. The Big "I" has two political action committees (PACs); one for donating to state office holders and the other for Federal.

The donations you make are used to support candidates and elected officials who work with our organization on issues of great importance to your livelihood. Because most insurance is regulated at the State level it remains our main focus. Everything from auto insurance to workers' compensation issues are debated almost annually at the State Capitol - insurance specific issues along with regulatory laws remain front and center. Insurance is a heavily regulated industry, and specifically the marketing of insurance by agents is often in the "cross hairs" of plaintiff lawyers which adds to the dynamic of court decisions that can significantly impact your ability to make a living.

The IIAI/PAC uses the donations by supporting members of the Iowa legislature, along with the Governor who have worked in defense of the insurance issues of importance to Iowa's independent agent community. At the Federal level - if you sell crop insurance, health insurance or flood insurance you have a great deal at risk.

Our Federal PAC called InsurPac supports members of the U.S. House and Senate who work closely with us on the Federal issues of greatest concern to agents. We think donating to the 2 PACs is like buying career insurance - without a diligent effort by the Big "I" on your behalf, your career and the value of your book of business is at risk.

Is Your Agency Prepared for What's Next?

As we enter 2025, shifts in the fed rate policy and the possible Tax Cut and Jobs Act sunset directly impact strategic planning and insurance agencies must stay ahead of the curve to remain competitive. In a recent IA Magazine article InsurBanc division director, Scott Freiday, discusses these financial shifts and four lending opportunities to drive growth and value in 2025.

Click here to read the article