SECTION 2. BACKGROUND

Section 199A was enacted on December 22, 2017, by section 11011 of An Act to provide for reconciliation pursuant to titles II and V of the concurrent resolution on the budget for fiscal year 2018, Public Law 115-97, 131 Stat. 2054, 2063 (TCJA). Parts of section 199A were

amended on March 23, 2018, as if included in TCJA, by section 101 of Division T of the Consolidated Appropriations Act, 2018, Public Law 115-141, 132 Stat. 348, 1151 (2018 Act). Unless otherwise indicated, all references to section 199A are to section 199A as amended by 2018 Act. Section 199A applies to taxable years beginning after December 31, 2017, and before January 1, 2026. Section 199A(g), as amended by 2018 Act, provides that Specified Cooperatives may claim a special deduction that is substantially similar to the domestic production activities deduction under former section 199, which was repealed by the TCJA. Specifically, section 199A(g) provides a deduction for a Specified Cooperative in an amount equal to 9 percent of the lesser of qualified production activities income (QPAI) of the Specified Cooperative for the taxable year determined under section 199A(g)(3) (A), or the taxable income of the Specified Cooperative for the taxable year determined under section 199A(g)(1)(C). Section 199A(g)(1)(B)(i) limits the amount of this deduction to 50 percent of the W-2 wages of the Specified Cooperative for the taxable year.

Section 199A(g)(1)(B)(ii) provides that W-2 wages are determined in the same manner as under section 199A(b) (4), without regard to section 199A(b) (4)(B) (which excludes from the definition amounts not properly allocable to qualified business income for purposes of section 199A(c)(1)) and after application of section 199A(b)(5) (concerning acquisitions, dispositions, and short taxable years), except that such wages do not include any amount that is not properly allocable to domestic production gross receipts (DPGR) for purposes of section 199A(g)(3)(A). Section 199A(b) (4)(A) defines the term W-2 wages to mean, with respect to any person for any taxable year of such person, the amounts described in section 6051(a)(3) and (8) paid by such person with respect to employment of employees by such person during the calendar year ending during such taxable year. Proposed §1.199A-11 further defines W-2 wages for purposes of section 199A(g). The proposed rev

enue procedure included in this Notice would provide guidance on the methods for calculating the amount of W-2 wages (as defined in section 199A(g) (1)(B)(ii) and proposed §1.199A-11) for purposes of determining the deduction limitation in section 199A(g)(1)(B)(i). Section 1.199A-11(c) of the proposed regulations provides the Internal Revenue Service with authority to issue computational guidance providing the methods that may be used for calculating W-2 wages, as defined in section 199A(g)(1) (B)(ii) and proposed §1.199A-11(c).