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Economic Analysis: The Market for Passthrough Deduction Tax Advice, Part 2

Posted on July 16, 2018

Which high-income business owners will be shut out of the new passthrough deduction?

Unless coming Treasury regulations take the untenable position that there are many businesses (beyond those in professional fields enumerated in the statute) whose principal asset is “the reputation or skill of one or more of its employees or owners,” most disqualified businesses will be in one of four general categories. In the terminology of the Census Bureau’s North American Industrial Classification System (NAICS), they are: “professional, scientific, technical services” (health, law, accounting, actuarial science, and consulting in the statute); “health care and social assistance” (health); “art, entertainment, and recreation” (athletics, performing arts); and “finance and insurance” (financial services, brokerage services, investing and investment management, trading, or dealing in securities, partnership interests, or commodities).

Yes, that sounds exciting. But we aren’t dragging you through this economic shoptalk and adding another abrasive acronym to your tax vocabulary for no reason. The NAICS is the basis of the revised list of 413 principal business activity codes that are on the back of the instructions to Schedule C, Form 1065, and Form 1120S. Every business filing these returns must pick a six-digit code corresponding to the activity from which it derives the largest percentage of total receipts.

It seems likely the IRS will use those taxpayer-supplied codes as its starting point for section 199A audits. In the past, choosing one of these six-digit codes didn’t matter much (except for purposes of section 448 (cash method of accounting) and section 1202 (small business stock)). But in the future practitioners might want to choose more carefully and be ready to defend the choice. Unlike the dictionary and some IRS guidance, the NAICS manual provides detailed definitions of these business activities that, in the absence of other authority, could be useful in making principal activity determinations.

Building on Sand

New section 199A explicitly cross-references the list of professions in section 1202 (pertaining to small business stock) as its starting point for professions potentially not qualified for the passthrough deduction. (The section 1202 regulations make no explicit reference to qualified professions.) The official explanation of the Senate amendment in the conference report to the Tax Cuts and Jobs Act (P.L. 115-97) makes extensive reference to section 448 (listing service corporations that can use the cash method of accounting) and the related regulations as guides to what Congress intended regarding the enumerated section 199A specified professions. See Table 1 for a comparison of the three code sections.

Several imposing issues await taxpayers with the advent of section 199A. All passthrough business owners actively engaged in the business, no matter their income, will have to carefully set salaries they pay to themselves (an age-old issue for subchapter S shareholders wishing to trim payroll tax) because higher wages reduce qualified business income eligible for the section 199A deduction. Passive real estate investors, no matter their income, may not be considered a trade or business eligible for the deduction — depending on the decisions embodied in coming regulations. Taxpayers will have to re-assess the benefits of C corporation versus passthrough status in light of section 199A and other new provisions in the TCJA, most notably the reduction in the corporate tax rate from 35 percent to 21 percent. And after Treasury promulgates aggregation and antiabuse regulations, taxpayers with multiple passthrough businesses will have to consider consolidation, and all passthrough businesses may consider deconsolidation to minimize income disqualified because a business is “specified” or subject to limitations based on wages paid and property owned.

Another unavoidable issue lurking in the background is what amount of business activity in a disqualified field disqualifies an entire trade or business from the passthrough deduction. Suppose there was no uncertainty in the definition of business activity, and we lived in a simple economy with only two lines of business: (unskilled) wood chopping, which qualifies for the section 199A deduction, and (skilled) stone carving, which is a specified business and does not. Even in this fairy tale world, Treasury would have to untangle a bunch of knotty questions.

If one entity operates in both of those fields, must the two businesses be considered separately (because the statute interpreted strictly seems to require it)? Or alternatively, should they be prevented from being separated for section 199A purposes (because this could be considered abusive tax planning)? If the entity is considered a single business, what is the minimum percentage of the business that must be devoted to unskilled wood chopping before the business becomes disqualified? Ninety-five percent? Ninety percent? Seventy percent? Setting that percentage too high makes it easy to qualify by taking a small amount of qualified business (that is, if an otherwise disqualified stone-cutting business does a little bit of wood chopping). Setting the threshold percentage too low may encourage business mergers with no economic substance (that is, a disqualified stone-cutting business merges with a qualified wood-chopping business solely to qualify its stone-cutting income for the section 199A deduction).

The threshold percentage is set at 95 percent in the section 448 regulations. But in that case the gravitational pull is 180 degrees in the opposite direction. Under section 448, the incentive is to be in a qualified profession (above the threshold) because a qualifying business is eligible for the cash method of accounting. For section 199A, the entire incentive is not to be among the listed professions (that is, to be below the threshold) so that a business isn’t disqualified from receiving the passthrough deduction.

The question arises whether the threshold percentage includes services “incident” to the services squarely in the qualifying field. In the section 448 regulations, incident services include supervision of the qualifying activity and administrative and support services related to that activity. Finally, we must ask what units will be used to measure any threshold percentage. The two leading candidates are business receipts (as required in the instructions to business tax forms) and employee hours spent on qualified activity (as in the section 448 regulations).

Enter the Commerce Department

The prior article in this series used tax return data to explore the characteristics of business owners potentially eligible for the passthrough business deduction. This provided good insight on the number of taxpayers (an estimated 3.35 million) above the statutory taxable income thresholds ($157,500 for singles, $315,000 for all others). But this data told us nothing about whether income was from disqualified businesses or if limitations to qualified businesses applied. That article also used business tax return data to explore the amount of passthrough income in broad industrial classifications used by the IRS. (Prior analysis: Tax Notes, July 9, 2018, p. 165.)

This article uses data from the U.S. Census Bureau in the Department of Commerce. These NAICS data are notable for several reasons. First, they provide business categories in much finer detail than those generally available from the IRS. Second, as already noted, the Census Bureau provides detailed definitions (and examples) for each business category. Third, for the first time in an economic census, data from the 2012 census, published in 2016, provides breakdowns of industry data separately for subchapter S and C corporations (as well as the usual information on sole proprietorships and partnerships). This means the latest round of census data gives us a fully fleshed-out view of the passthrough sector that was previously unavailable. This article uses this data to explore the potential scope of passthrough business in professions enumerated in section 199A (as shown in the third column of Table 1, excluding “any trade or business where the principal asset of such trade or business is the reputation or skill of one or more of its owners or employees”).

The 2017 NAICS Manual is in effect through 2022 when it will be revised. It is available free online from the Census Bureau and is also available in hard copy from online sellers.

Table 1. Comparison of “Qualified” Service Activities in 3 Code Sections

Section 448 (allows cash method of accounting for corporations in fields listed below)

Section 1202 (denies exemption of certain capital gains from sale of stock of small businesses in fields listed below)

Section 199A (potentially denies or limits 20 percent passthrough business deduction for owners of businesses in fields listed below)

“Qualified personal service corporation” means any corporation substantially all of the activities of which involve the performance of services in the fields of:

“Qualified trade or business” means any trade or business other than any trade or business involving the performance of services in the fields of:

“Qualified trade or business” means any trade or business other than a “specified service trade or business,” which is any trade or business involving the performance of services in the fields of:

health

health

health

law

law

law

engineering

engineering

 

architecture

architecture

 

accounting

accounting

accounting

actuarial science

actuarial science

actuarial science

performing arts

performing arts

performing arts

consulting

consulting

consulting

 

athletics

athletics

 

financial services

financial services

 

brokerage services

brokerage services

 

any trade or business where the principal asset of such trade or business is the reputation or skill of one or more of its employees

any trade or business where the principal asset of such trade or business is the reputation or skill of one or more of its owners or employees

 

banking, insurance, financing, leasing, investing, or similar business

investing and investment management, trading, or dealing in securities, partnership interests, or commodities

 

farming, including the raising or harvesting of trees

 

 

production or extraction of oil and gas products

 

 

hotel, motel, restaurant, or similar business

 

Source: Internal Revenue Code.

Lawyers and Such

The first place in the Census Bureau data to look for businesses in enumerated professions potentially disqualified for the section 199A deduction comes under the general heading of “Professional, Scientific, and Technical Services.” These data are presented in Table 2.

Clearly, the 49,000 sole proprietorships, 30,000 partnerships, and 67,000 S corporations in the category “office of lawyers” are prime candidates for disqualified businesses. But what about “title abstract and settlement office” and “all other legal services”?

The IRS and the courts provide zero guidance on the scope of the definition of the field of law for tax purposes. The lopsided section 448 regulations are not helpful. Of the nine types of businesses listed in the statute, two get a one-paragraph description (health and performing arts), one gets a one-paragraph description with 10 examples (consulting), one gets a parenthetical clarification (engineering includes surveying and mapping), and the remaining five get no specific attention. Law is one of those ignored professional fields. There are apparently no revenue rulings, private letter rulings, or technical advice memoranda on the definition of business involving the performance of services in the field of law. Nor are any court cases on the radar. In this case, left with no other guidance, use of the Census Bureau’s NAICS definition — by the IRS or by taxpayers — could be pivotal. After all, the IRS itself uses NAICS as the basis for its six-digit industry codes.

CPAs seem like a sure bet for disqualification. And, we are sorry to inform many of our readers, if the IRS piggybacks on the Tax Court’s section 448 decision in Rainbow Tax Services v. Commissioner, 128 T.C. 42 (2007), income generated by more than 16,000 tax return preparation establishments won’t qualify for the deduction (if the owners’ taxable income is above threshold amounts). For other similar businesses, like payroll services, there is only uncertainty.

At this point it’s worth reinforcing the idea (suggested by several commentators) that Treasury should refer to NAICS industry codes in its coming regulations. First, why create a new system (based on what principle, nobody knows) when there is a detailed system already in place? Second, if the IRS creates its own definition — for example, of accounting — that is different from the Census Bureau’s, it will create confusion among taxpayers as well as in official government statistics. Taxpayers will be unlikely to use different codes for census purposes and tax purposes. Tax-minimizing businesses will drift toward using the tax definition, and all the careful work Census has done over the decades in developing those classifications will be degraded.

Under the new memorandum of agreement between Treasury and the Office of Management and Budget, economically significant tax regulations will get a full review by the Office of Information and Regulatory Affairs (OIRA). Part of the OIRA process allows review by other federal agencies. Section 199A regulations are a prime candidate for economically significant regulations. In an action that would be foreign to the tax community, the Commerce Department could have input — perhaps significant — into tax regulations. (Prior analysis: Tax Notes, Apr. 23, 2018, p. 443.)

A potentially huge vein of section 199A disqualified business comes under the heading of consulting services. This is the category in which the section 448 regulations, while in other places so terse, are downright chatty. The regulations’ definition of consulting is centered on the phrase “advice and counsel.” A consulting business for section 448 purposes provides advice and counsel and is compensated directly for that advice and counsel and not through the sale of related products and services. So in Example 1 in the regulations, an economist providing a forecast and paid directly for that economic forecast is a consultant, but in Example 5, a broker who provides an economic forecast and receives compensation in the form of fees for trading securities is not. In Example 2, a computer specialist who is paid for determining a client’s computer needs is a consultant, but in Example 6, a computer specialist who assists a client in assessing computer processing needs and is compensated through sales of computer equipment to the client isn’t a consultant. Similarly, in Example 3 a business that helps a client determine its management and hiring needs and is paid for that advice is a consultant, but if a similar business is compensated by the client for each successful hire (Example 6) or by the employees hired (Example 7), it isn’t a consulting business.

Many of the business lines listed in Table 2 are potentially consultants under the section 448 regulations, particularly those with “consultant” in their name, including computer systems consultants; human resources consulting; human resources and personnel management consulting; marketing consulting; process, physical distribution, and logistics consulting; other management consulting services; environmental consulting services; economic and related consulting services; and all other scientific and technical consulting services.

Although they aren’t specified businesses under section 199A, the engineering and architecture categories deserve special mention. As indicated in Table 1, the two categories are included in the section 448 and 1202 list of qualified professions. And they were included in both the House and Senate versions of the TCJA’s passthrough tax relief but were removed in conference. However, a strict interpretation of the “reputation or skills” test could put those businesses right back into disqualified status. Now, everybody says this was a drafting oversight and that Congress clearly intended to exclude architects and engineers from the list. OK, let’s go along with that for argument’s sake. Does that mean businesses should want to be classified in either the architect or engineer category because they would provide safety from disqualification? It will be interesting to see how Treasury untangles this knot. But with no other guidance or court decisions available on the topic — especially if Treasury regulations also try to lasso a wide range of services into the “reputation or skills” category — taxpayers will be looking for an expansive definition of architecture and engineering.

If section 199A regulations follow a Tax Court ruling, businesses conducting geotechnical testing may be disappointed to find out they are not in the field of engineering (Alron Engineering & Testing Corp. v. Commissioner, T.C. Memo. 2000-335). Similarly, businesses that stake claims for mineral rights won’t be happy if the IRS continues to believe those services don’t fall within the field of engineering (LTR 9232009). If engineering is a safe harbor for purposes of section 199A, those taxpayers may want to use the NAICS manual to dispute the IRS’s prior assertions.

Actuarial science is a section 199A specified service, but no definition is provided by any IRS guidance or the courts. NAICS code 5416121 is “actuarial consulting (except insurance),” and NAICS code 524298 is “all other insurance-related activities,” which includes insurance actuarial consulting. Why shouldn’t coming regulations align the statutorily prescribed category of actuarial science with the NAICS categories?

Doctors and Who?

Table 3 shows all the NAIC categories related to health. When it wrote the section 488 regulations, the IRS decided to limit the statute’s potentially broad-ranging category of health services to medically related services (“physicians, nurses, dentists, and other similar health-care professionals”). The category doesn’t “include the provision of services not directly related to a medical field, even though the services may purportedly relate to the health of the service recipient.” Health clubs and spas were provided as examples of nonqualifying businesses. Subsequent IRS rulings reinforced inclusion of uniformed medical personnel in the category of health who directly provided patient care. So, for example, emergency ambulance technicians (LTR 9309004), physical therapists (LTR 9222004), X-ray technicians (FSA 1999-919), and veterinarians (Rev. Rul. 91-30, 1991-1 C.B. 61) qualify. Medical billing (LTR 8927006), laboratory testing (LTR 201717010), and drug manufacturing and testing (LTR 201436001) don’t.

Veterinarians may be interested to note that under the NAICS, their profession isn’t considered health (in Table 3) but the provision of a technical service (in Table 2). Again, if the “reputation and skill” clause isn’t given broad application, these taxpayers might want to argue that the NAICS classification should justify their qualification for full section 199A benefits.

Actors, Jocks, and Stockbrokers

Businesses involving the performance of services in the field of performing arts and field of athletics are specified businesses under section 199A. Regulations for section 448 explicitly kicked professional athletes out of the enumerated profession, but the TCJA wants them in.

Table 2. NAICS Categories in Which Passthrough Businesses Involving the Performance of Services in the Fields of Law, Accounting, Actuarial Sciences, and Consulting Services Are Likely to Be Classified (dollar figures in thousands)

NAICS Code

 

Industry

Proprietorships

Partnerships

S Corporations

C Corporations

Establishments

Average Salary

Establishments

Average Salary

Establishments

Average Salary

Establishments

Average Salary

Legal Services

541110

Offices of lawyers

48,890

$35

29,685

$90

67,256

$69

26,010

$115

541191

Title abstract and settlement offices

417

$38

1,651

$46

5,029

$45

2,505

$51

541199

All other legal services

433

n.a.

304

$46

1,849

$41

698

$57

Accounting, Tax Preparation, and Related Services

541211

Offices of certified public accountants

11,321

$28

8,543

$79

28,416

$54

8,856

$80

541213

Tax preparation services

6,153

$7

1,747

n.a.

8,574

$11

10,574

$8

5412141

Talent payment services

56

n.a.

16

n.a.

77

n.a.

54

$65

5412142

Payroll services (except talent payment)

451

n.a.

758

n.a.

1,733

n.a.

2,785

$36

541219

Other accounting services

7,172

n.a.

3,117

n.a.

20,586

$33

6,833

$42

Architectural, Engineering, and Related Services

541310

Architectural services

2,375

$47

1,835

$66

12,486

$64

4,170

$78

541320

Landscape architectural services

742

n.a.

338

$45

2,859

$46

942

$59

541330

Engineering services

2,598

n.a.

3,588

$73

31,280

$71

20,826

$89

541340

Drafting services

182

$31

113

$45

1,679

$46

389

$53

541350

Building inspection services

307

$32

286

$34

4,007

$37

875

$47

541360

Geophysical surveying and mapping services

36

$39

49

$51

464

$54

211

$80

541370

Surveying and mapping (except geophysical)

1,573

$27

509

$43

4,480

$45

1,523

$62

541380

Testing laboratories

277

n.a.

526

$62

3,180

$51

2,622

$59

Specialized Design Services

541410

Interior design services

1,248

$29

735

$46

7,412

$49

2,054

$46

541420

Industrial design services

94

$37

122

$79

880

$62

341

$92

541430

Graphic design services

1,390

n.a.

955

$59

10,482

$51

2,469

$57

541490

Other specialized design services

171

$34

163

$42

1,034

$46

394

$70

Computer System Design and Related Services

541511

Custom computer programming services

2,009

n.a.

5,682

$74

38,454

$74

18,153

$86

5415121

Computer systems integrators

638

n.a.

1,680

$75

10,879

$73

13,850

$96

5415122

Computer systems consultants (except integrators)

737

n.a.

1,222

$93

13,764

$76

4,730

$109

541513

Computer facilities management services

282

n.a.

584

$68

4,076

$68

3,170

$91

541519

Other computer related services

256

n.a.

899

$72

6,612

$69

2,709

$103

 

Other Professional, Scientific, and Technical Services

541611

Administrative, general management consulting

3,738

$55

6503

$110

42,852

$67

15,168

$103

541612

Human resources consulting services

407

n.a.

605

$47

4,085

$60

3,117

$87

5416121

Actuarial consulting

33

$70

55

$104

423

$102

240

$179

5416123

Human resources, personnel management consulting

374

n.a.

550

$45

3,662

$57

2,877

$80

541613

Marketing consulting services

1,611

$44

2,981

$63

19,285

$54

6,464

$66

541614

Process, physical distribution, logistics consulting

315

n.a.

795

$36

4,412

$57

2,613

$62

541618

Other management consulting services

275

$44

498

$59

3,970

$59

1,077

$66

541620

Environmental consulting services

484

n.a.

767

$54

6,315

$56

2,654

$70

5416901

Economic and related consulting services

214

n.a.

177

$88

1,267

$95

799

$113

5416909

All other scientific and technical consulting services

1,322

$39

1,470

$68

11,319

$63

4,015

$81

541711

Research and development in biotechnology

68

$73

359

$77

510

$53

1,806

$153

541712

R&D in the physical, engineering, life sciences (except biotech)

318

n.a.

1,225

$89

3,197

n.a.

5,613

$116

54172

R&D in social sciences, humanities

86

n.a.

95

$65

558

n.a.

311

$48

541810

Advertising agencies

598

$70

1,535

$75

7,560

$66

3,414

$89

541820

Public relations agencies

643

n.a.

866

$83

4,652

$76

1,802

$101

541830

Media buying agencies

24

n.a.

114

$86

476

$75

340

$89

541840

Media representatives

63

n.a.

176

$86

746

$61

501

$88

5418402

Publishers’ advertising representatives

44

n.a.

95

$59

565

$57

273

$76

541850

Outdoor advertising

166

$30

317

$51

1,301

$47

887

$47

541860

Direct mail advertising

152

$35

268

$47

1,656

$41

841

$51

541870

Advertising material distribution services

36

$9

93

$42

447

$48

221

$76

541890

Other services related to advertising

704

n.a.

605

$48

4,418

$24

1,904

$43

5418902

Advertising specialties goods distributor

294

n.a.

276

$40

2,345

$42

1,039

$42

5418903

Sign painting and lettering shop

305

$22

122

$39

1,012

$30

354

$38

5418908

Other advertising, welcoming services

105

n.a.

207

$58

1,061

$16

511

$44

541910

Marketing research, opinion polling

229

$45

556

$48

2,656

$41

2,102

$66

541921

Photography studios, portrait

2,591

$17

1,013

n.a.

5,931

$21

4,113

$18

541922

Commercial photography

427

$25

179

n.a.

2,359

$46

736

$47

541930

Translation and interpretation services

183

$27

159

$62

1,514

$52

488

$40

541940

Veterinary services

5,937

$24

2,296

$29

16,621

$32

5,192

$37

5419901

Meteorological services

10

n.a.

16

n.a.

182

$54

133

$69

5419909

Other professional, scientific, and technical services

850

n.a.

966

$49

7,238

$49

3,228

$63

Source: U.S. Census Bureau. https://www.census.gov/programs-surveys/economic-census/data/tables.2012.html. Data are from 2012.

The regulations for section 448 explain that services in the field of the performing arts are the provision of services by actors, actresses, singers, musicians, entertainers, and similar artists. Excluded are persons who manage or promote performing artists and businesses that broadcast and disseminate the performances of artists. Following the themes laid out in the regulations, the IRS said in LTR 9416006 that “only persons who perform for an audience will be considered to perform services in the field of the performing arts.” The activities of a director, it pointed out, don’t involve performing before an audience. Table 4 includes the data on passthrough businesses, including performing artists (qualified under section 448) and their promoters, agents, and managers (not qualified under section 448).

Regarding the new category of athletics, if section 199A regulations adopt the same line of reasoning as the section 448 regulations apply to performing artists, only athletes who “perform” in front of spectators will be included. A twist that might one day make headlines is the application of section 199A to sports teams. Most teams are closely held businesses organized as limited partnerships or S corporations (Scott R. Rosner and Kenneth L. Shropshire, The Business of Sports 43 (2010)). It certainly seems to be within Treasury’s authority to include those franchises in the definition of passthrough businesses performing services in the field of athletics. If President Trump is still interested in using tax policy to punish NFL teams, his Treasury Department could turn on that switch.

Table 5 shows the subset of NAICS categories that seem to closely align the financial service business categories in section 199A (listed in Table 1).

The Good News

In this author’s opinion, the “reputation or skill” clause will and should be interpreted to apply narrowly. That means the vast array of passthrough American businesses listed in Table 6 — including manufacturers, wholesale and retail trade, restaurants, and hotels — will be eligible for the full benefits of section 199A. There are several reasons, of which only a few will be mentioned here. First, it will benefit taxpayers and voters, and nobody is lobbying Treasury for more stringent regulations. That will make Treasury’s job more pleasant. It will reduce revenue collected by Treasury, but it will also have the beneficial side effect of making tax law more certain because there will be fewer court challenges. Second, the “reputation or skill” clause requires the exercise of much subjective judgment in situations that depend heavily on facts and circumstance. In other words, it is an administrative nightmare for the already overburdened IRS, and it draws a wobbly boundary that will scare conservative taxpayers and embolden the aggressive. Third, there is no clear guiding principle for any restrictions on specific professions, so why exert effort to reach a meaningless goal? (Prior analysis: Tax Notes, Mar. 5, 2018, p. 1320.)

A fourth good reason was discussed in these pages recently by John Cunningham, a former Justice Department attorney in the Tax Division. He applied to section 199A the canon of statutory interpretation known as ejusdem generis. The phrase means that if there is a list of things that ends with a vague catchall (like “and other stuff” or “et cetera”), the catchall should be narrowly construed to be similar to the items in the prior list. If the regulation writers apply this principle to the “reputation or skill” clause, the only specified fields will be those involving skilled white-collar professionals and elite professional performers and athletes. (Prior analysis: Tax Notes, July 2, 2018, p. 83.) Sorry, plumbers and electricians, if it seems like you are being insulted. But we think you’ll get over it.

Table 3. NAICS Categories in Which Passthrough Businesses Involving the Performance of Services in the Fields of Health Are Likely to Be Classified (dollar figures in thousands)

 

NAICS Code

Industry

Proprietorships

Partnerships

S Corporations

C Corporations

Establishments

Average Salary

Establishments

Average Salary

Establishments

Average Salary

Establishments

Average Salary

Offices of Physicians and Dentists

621111

Physicians (except mental health specialists)

27,392

n.a.

16,367

$56

91,673

$70

74,431

$96

621112

Physicians, mental health specialists

2,018

n.a.

539

$38

4,937

$54

3,227

$63

621210

Dentists

36,608

$30

7548

$37

65,892

$46

23,153

$56

Offices of Other Health Professionals

621310

Chiropractors

9,843

$18

1,917

$27

22,909

$29

4,122

$33

621320

Optometrists

5,098

$23

1,368

$29

12,054

$35

3,041

$39

621330

Mental health practitioners (except physicians)

3,381

$20

1,039

$26

11,539

$30

4,606

$34

6213401

Speech therapists and audiologists

598

$30

414

$32

3,385

$35

1,484

$39

6213402

Physical and occupational therapists

1,775

$30

3,602

$40

14,351

$38

8,638

$43

621391

Podiatrists

2,642

$22

585

$31

3977

$43

1,579

$51

621399

All other health practitioners

1,708

$21

1,168

$25

9829

$31

3,835

$50

Outpatient Care Centers

621410

Family planning centers

29

$25

66

$52

238

$64

112

$55

621420

Outpatient mental health, substance abuse

298

$28

538

$32

1,894

$32

1,014

$36

621491

HMO medical centers

0

n.a.

12

n.a.

4

$16

78

n.a.

621492

Kidney dialysis centers

16

n.a.

487

n.a.

231

$44

4,397

$44

621493

Ambulatory surgical, emergency centers

268

n.a.

2,262

$42

1,491

$43

1,418

n.a.

621498

All other outpatient care centers

270

n.a.

962

$44

1,900

$46

2,473

$59

Medical and Diagnostic Laboratories

621511

Medical laboratories

149

n.a.

675

$47

1,406

$55

4,464

$61

621512

Diagnostic imaging centers

201

n.a.

1,818

$46

2,571

$57

2,216

$71

Home Healthcare Services

621610

Home healthcare services

3,764

$19

3,546

$27

11,261

$22

8,592

$25

Other Ambulatory Healthcare Services

621910

Ambulance services

106

$21

314

$32

1,193

$31

1,636

$38

621991

Blood and organ banks

9

n.a.

37

n.a.

75

$51

362

$31

6219991

Medical case management

105

$34

142

$44

732

$48

410

$70

6219999

All other ambulatory healthcare

145

n.a.

225

n.a.

876

$38

559

$45

Hospitals

6221102

General medical, surgical hospitals

12

$41

255

$52

39

$43

526

$51

6222102

Psychiatric and substance abuse hospitals

13

$38

35

$38

27

$40

176

$31

6223102

Other specialty hospitals

14

$40

198

$46

8

$55

413

$45

Nursing and Residential Care Facilities

623110

Nursing care facilities (skilled nursing)

694

n.a.

4,348

$28

3,660

$27

4,925

$27

623210

Residential intellectual, developmental disability facilities

1,298

$18

973

$17

3,299

$19

4,825

$20

623220

Residential mental health, substance abuse facilities

231

$25

386

$28

911

$29

664

$27

623311

Continuing care retirement communities

272

$20

976

$22

998

$21

776

$25

623312

Assisted living facilities for the elderly

2,703

$17

3,821

$20

4,670

$19

4,131

$22

623990

Other residential care facilities

236

$16

151

$21

480

$22

515

$24

Social Assistance

624110

Child and youth services

301

$15

197

$23

627

$27

510

$28

624120

Services for the elderly, persons with disabilities

3,579

n.a.

1,910

$15

5,674

$15

3,000

$16

624210

Community food services

15

$29

9

$28

27

$19

39

$24

624221

Temporary shelters

5

$23

9

$30

6

$31

15

$19

624229

Other community housing services

21

n.a.

31

$27

34

$36

59

$27

624230

Emergency and other relief services

7

$56

7

$21

33

$47

19

$51

624310

Vocational rehabilitation services

299

$25

106

$21

851

$28

745

$31

624410

Child day-care services

17,681

$13

5,950

$16

17,912

$17

12,824

$18

Source: U.S. Census Bureau. https://www.census.gov/programs-surveys/economic-census/data/tables.2012.html. Data are from 2012.

Table 4. NAICS Categories in Which Passthrough Businesses in the Field of Performing Arts Are Likely to Be Classified (dollar figures in thousands)

 

NAICS Code

Industry

Proprietorships

Partnerships

S Corporations

C Corporations

Establishments

Average Salary

Establishments

Average Salary

Establishments

Average Salary

Establishments

Average Salary

Performing Arts, Spectator Sports, and Related Industries

711110

Theater companies and dinner theaters

72

n.a.

358

$37

521

$25

317

$32

711120

Dance companies

8

n.a.

8

n.a.

34

n.a.

18

n.a.

711130

Musical groups and artists

281

n.a.

251

$40

1,945

$61

488

n.a.

711190

Other performing arts companies

28

n.a.

21

n.a.

133

n.a.

79

n.a.

711211

Sports teams and clubs

74

$198

417

$240

216

$414

234

$231

711212

Racetracks

43

$21

156

$26

210

$28

235

$30

711219

Other spectator sports

603

$27

342

$62

1,255

$57

379

$56

711310

Promoters of performing arts, sports, and similar events with facilities

105

n.a.

361

$18

433

n.a.

436

$14

711320

Promoters of performing arts, sports, and similar events without facilities

187

n.a.

389

$46

1,555

n.a.

673

$67

711410

Agents and managers for artists, athletes, entertainers, and other public figures

253

n.a.

479

$123

2,123

$105

860

$89

711510

Independent artists, writers, and performers

2,169

n.a.

836

$40

13,817

$166

5,539

$164

712110

Museums

56

n.a.

62

$27

119

n.a.

160

$29

Museums, Historical Sites, and Similar Institutions

712120

Historical sites

10

n.a.

13

$17

13

n.a.

23

n.a.

712130

Zoos and botanical gardens

32

$19

32

$20

78

$28

63

$24

712190

Nature parks and other similar institutions

21

$24

25

$22

58

n.a.

35

n.a.

Amusement, Gambling, and Recreation Industries

713110

Amusement and theme parks

21

$33

117

$29

133

$38

171

$24

713120

Amusement arcades

257

$9

726

$10

1264

$12

610

$13

713210

Casinos (except casino hotels)

11

n.a.

51

$29

39

$26

179

$31

713290

Other gambling industries

198

n.a.

405

$23

881

$25

1,048

$27

713910

Golf courses and country clubs

636

n.a.

2555

$22

2,534

n.a.

2,993

$24

713920

Skiing facilities

14

$10

71

$10

102

$7

182

$10

713930

Marinas

204

$30

708

$34

1,512

$36

1,358

$32

713940

Fitness and recreational sports centers

2,854

n.a.

7188

$13

9,980

$13

5,332

$15

713950

Bowling centers

350

n.a.

620

$13

1,704

$13

1,388

$14

713990

All other amusement and recreation industries

1,416

n.a.

2,421

$17

4,827

n.a.

2,754

$21

Source: U.S. Census Bureau. https://www.census.gov/programs-surveys/economic-census/data/tables.2012.html. Data are from 2012.

Table 5. NAICS Categories in Which Passthrough Businesses in the Fields of Financial Services, Brokerage Services, Investing and Investment Management, Trading, or Dealing in Securities, Partnership Interests, or Commodities Are Likely to Be Classified (dollar figures in thousands)

 

NAICS Code

Industry

Proprietorships

Partnerships

S Corporations

C Corporations

 

Establishments

Average Salary

Establishments

Average Salary

Establishments

Average Salary

Establishments

Average Salary

Securities, Commodity Contracts, and Other Financial Intermediaries, and Related Activities

523110

Investment banking, securities dealing

284

n.a.

729

$236

996

$189

1,131

$365

523120

Securities brokerage

2,482

n.a.

13,135

$107

4,583

$81

20,090

$154

523130

Commodity contracts dealing

40

n.a.

19

$126

259

$90

406

$256

523140

Commodity contracts brokerage

86

$52

21

$155

615

$81

539

$149

523210

Securities and commodity exchanges

0

n.a.

0

n.a.

0

n.a.

29

$190

523910

Miscellaneous intermediation

727

$78

2,552

$183

2,675

$110

2,046

$159

523920

Portfolio management

2,581

$113

6,281

$338

9,088

$157

5,599

$216

523930

Investment advice

2,740

$43

2,468

$135

6,272

$91

4,251

$112

523991

Trust, fiduciary, custody activities

596

$48

227

$94

405

$69

1,108

$78

523999

Other financial investment activities

43

n.a.

134

$99

339

$70

236

$107

Source: U.S. Census Bureau. https://www.census.gov/programs-surveys/economic-census/data/tables.2012.html. Data are from 2012.

Table 6. U.S. Businesses by Tax Filing Status and by 2-Digit NAICS Code, Business Categories Unlikely to Be in Specified (Unqualified) (fields explicitly included in section 199A are in shaded cells)

Proprietorships

Partnerships

S Corporations

C Corporations

All Establishments

Establishments

Average Receipts

Establishments

Average Receipts

Establishments

Average Receipts

Establishments

Average Receipts

Establishments

Average Receipts

Mining (NAICS 21)

1,561

2,301

2,913

14,650

n.a.

n.a.

n.a.

n.a.

17,090

206,041

Utilities (NAICS 22)

221

n.a.

846

$34,989

1,098

$5,406

15,426

$32,027

17,595

$30,230

Construction (NAICS 23)

96,021

$417

45,419

$3,113

322,519

$2,041

134,044

$3,928

598,003

$9,500

Manufacturing (NAICS 31-33)

23,591

$2,408

26,625

$20,782

121,521

$5,500

84,361

$51,769

256,304

$22,226

Wholesale Trade (NAICS 42)

16,667

$4,257

33,835

$24,012

182,301

$8,160

186,238

$29,620

419,464

$18,834

Retail Trade (NAICS 44-45)

107,811

$823

99,129

$3,776

373,555

$3,110

475,684

$5,402

1,062,083

$3,973

Transportation and Warehousing (NAICS 48-49)

21,162

$634

19,912

$2,553

92,586

$1,641

79,940

$6,429

213,809

$3,417

Information (NAICS 51)

3,932

$2,623

16,492

$10,467

34,958

$1,712

82,784

$12,018

138,341

$8,952

Finance and Insurance (NAICS 52)

48,356

$463

42,933

$4,170

120,194

$978

255,907

$12,379

468,183

$7,766

Real Estate and Rental and Leasing (NAICS 53)

27,637

$644

85,715

$1,561

135,701

$757

104,478

$2,228

354,106

$1,377

Professional, Scientific, and Technical Services (NAICS 54)

111,259

$361

89,741

$3,528

443,075

$863

207,282

$3,380

851,542

$1,691

Administrative and Support and Waste Management and Remediation Services (NAICS 56)

59,924

$302

38,968

$2,079

173,087

$1,292

114,274

$3,061

386,387

$1,742

Educational Services (NAICS 61)

7,595

$214

7,283

$724

28,525

$543

12,519

$1,365

55,922

$706

Healthcare and Social Assistance (NAICS 62)

124,936

$422

65,620

$2,693

307,952

$947

191,581

$2,538

690,525

$1,461

Arts, Entertainment, and Recreation (NAICS 71)

9,903

$785

18,612

$2,379

45,486

$883

25,554

$2,701

99,659

$1,622

Accommodation and Food Services (NAICS 72)

92,002

$447

134,126

$1,198

250,956

$871

185,123

$1,552

662,489

$1,069

Other Services (NAICS 81)

85,078

$214

41,431

$576

185,521

$553

110,449

$780

422,719

$546

Total of Above 17 Categories

836,095

 

766,687

 

2,819,035

 

2,265,644

 

6,697,131

 

Source: U.S. Census Bureau. https://www.census.gov/programs-surveys/economic-census/data/tables.2012.html. Latest mining data from 2007. All other data from 2012. Data for two-digit code 55, Management of companies and enterprises, not included above has 53,765 establishments and $115.5 billion in gross receipts.

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