A new study released on Monday supports the Section 199A deduction for small and family-owned businesses, mirroring a bipartisan bill led by U.S. Rep. Lloyd Smucker (R-PA) that would make the deduction permanent for such qualified business income.
Under current law, the deduction expires after Dec. 31, 2025.
“This report underscores what I have heard directly from small and family-owned businesses in my community and across the nation — Section 199A allows Main Street businesses to grow, create jobs, and invest in their community,” said Smucker, who sponsored the Main Street Tax Certainty Act, H.R. 4721, in July 2023 alongside 91 original cosponsors.
The new study — released Sept. 9 by the S Corporation Association and authored by Robert Carroll at Ernst and Young — focuses on the economic footprint of the 199A deduction and answers the question: “Just how much economic activity is supported by Section 199A?”
The Section 199A deduction, which was created under the 2017 Tax Cuts and Jobs Act, provides a 20 percent deduction for pass-through businesses, allowing these businesses to reinvest their hard-earned capital, increase wages, and hire more employees.
Specifically, the new study found that 2.6 million jobs and $325 billion of the GDP are supported by the deduction. Smucker’s bill would make the 20 percent pass-through business tax deduction permanent.
“Making Section 199A permanent will prevent a massive tax hike and provide small business owners and their employees the certainty they need to thrive,” said Smucker.
The congressman, a member of the tax-writing U.S. House Ways and Means Committee, in early August held a roundtable in southern York County, Pa., to discuss tax policies impacting small businesses in Pennsylvania’s 11th District.
Small businesses from York and Lancaster counties offered testimony about how their operations are impacted by federal tax policy, including the potential expiration of Section 199A.
Among the many business leaders who testified during the roundtable discussion were Eric Paules, CEO of Crescent Industries Inc. in New Freedom; Bill Riff, owner and team leader at Sport Clips in East Petersburg; Eric Wenger, a partner with RKL’s Tax Services Group in Lancaster; and Luke Austin, a financial advisor with Edward Jones in Hanover, among others.
Brian Reardon, president of the S Corporation Association, which requested the study, said Section 199A permanency is essential to blocking a massive tax increase on Main Street businesses while ensuring they remain competitive with the lower rate applied to larger public corporations.
“This study makes clear that 199A supports millions of jobs located in thousands of communities around the country,” said Reardon. “Without it, those communities would have fewer jobs, lower wages, and smaller economies.”
Reardon also said that the Main Street Certainty Act should be part of any tax package considered by Congress next year.
U.S. Sen. Steve Daines (R-MT), who in May 2023 led the identical bill in his chamber, S. 1706, said it’s no surprise that when small businesses get much-needed tax relief, they not only thrive, but they help the whole economy grow.
“It’s time this tax deduction is made permanent so that Montana small and family-owned businesses can continue to create jobs, serve their communities and spur economic activity,” said the senator.