As you all know, the Tax Cuts and Jobs Act, signed into law last December, provided qualified pass-through businesses with a 20% deduction, bringing the effective tax rate for those businesses down to 29.6%.

The law established conditions that would have to be met for a company to qualify for the deduction and it expressly excluded most service businesses.

Since enactment of the law, the Department of the Treasury has been writing the regulations necessary for implementation of the law and the 20% deduction. These regulations are meant to provide everything the pass-through companies need to comply with the TCJA. According to the Nonpartisan Tax Foundation Think Tank, “About 30 million U.S. businesses, including many small ‘mom and Pop’ businesses are organized as pass-through entities.”

ASA has been engaged in the effort to achieve favorable rules, working with the Parity for Main Street Employers coalition and the S-Corp Association in continuing LIFO preservation.

This critical Section 199A proposed rule on the “Qualified Business Income Deduction” released was released.  

The TCJA was widely seen as a business-friendly tax bill, and its authors’ intent was to have the new law encourage economic growth and job creation. While opponents of the TCJA argue it was simply “a tax cut for the rich,” the recent strong economic growth numbers and low unemployment suggest otherwise.

Key business provisions in the TCJA include:

• C corporation income tax rate reduced from 35% to 21%. Corporate AMT repealed. Both changes permanent.

• Pass-through businesses provided a 20% deduction from business income, not to exceed 50% of W-2 wages, and pay 37% on the balance for a blended business rate of 29.6%, down from 39.6%. Provisions expire at the end of 2025.

• LIFO preserved.

• Bonus depreciation increased to 100% for 5 years, reduced by 20% per year thereafter; expiring at the end of 2027.

• Liberalized small-business expensing.

• Death tax exclusion doubled to $22.4 million per couple, $11.23 million per individual. Stepped up basis retained. Provisions expire at the end of 2025.

• Transition rules eased for those converting to C-corp. status.

• An international territorial tax regime is established along with a “deemed repatriation” tax.


While the proposed rule is, of course, complicated, our initial review finds it a positive step, especially the rules governing the ability of a pass-through to aggregate income from multiple legal entities to qualify for the deduction.


The proposed rule will be open for public comment after it is published in the Federal Register and we would greatly appreciate your assessment of the rule and how it will impact your company if you are a pass-through business. Please contact ASA Director of Government Relations Catherine Treadwell at


In the meantime, click here to read the proposed rule.