In this fourth installment of my multi-part series on the One Big Beautiful Bill Act (the “Act”), Steve Nofziger and I discuss a provision of the Act that impacts pass-through business entities and their owners, Code Section 199A.[1]
Background
Code Section 199A, commonly referred to as the Qualified Business Income (“QBI”) deduction, was enacted during President Trump’s first term in office as part of the Tax Cuts and Jobs Act (“TCJA”). As you may recall, the TCJA changed the C corporation tax rate landscape that came with a top tax rate of 35% to a flat rate structure pegged at 21%. Meanwhile, pass-through entities (S corporations, partnerships and sole proprietorships), which are predominately owned by individuals, were left with a graduated tax rate structure that quickly rises to a rate of 37%.
To create more of an even playing field between pass-through entities and C corporations, the TCJA created a new deduction for pass-through entities with the enactment of Code Section 199A. This provision allows owners of certain pass-through entities a 20% deduction of “qualified business income” (“QBI”).
Like many provisions of the TCJA, Code Section 199A was scheduled to sunset at the end of 2025. The Act, signed into law by President Trump on July 4, 2025, made Code Section 199A a so-called permanent provision. It also made several changes to its deduction framework.
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Larry J. Brant
Editor
Larry J. Brant is a Shareholder and the Chair of the Tax & Benefits practice group at Foster Garvey, a law firm based out of the Pacific Northwest, with offices in Seattle, Washington; Portland, Oregon; Washington, D.C.; New York, New York, Spokane, Washington; Tulsa, Oklahoma; and Beijing, China. Mr. Brant is licensed to practice in Oregon and Washington. His practice focuses on tax, tax controversy and transactions. Mr. Brant is a past Chair of the Oregon State Bar Taxation Section. He was the long-term Chair of the Oregon Tax Institute, and is currently a member of the Board of Directors of the Portland Tax Forum. Mr. Brant has served as an adjunct professor, teaching corporate taxation, at Northwestern School of Law, Lewis and Clark College. He is an Expert Contributor to Thomson Reuters Checkpoint Catalyst. Mr. Brant is a Fellow in the American College of Tax Counsel. He publishes articles on numerous income tax issues, including Taxation of S Corporations, Reasonable Compensation, Circular 230, Worker Classification, IRC § 1031 Exchanges, Choice of Entity, Entity Tax Classification, and State and Local Taxation. Mr. Brant is a frequent lecturer at local, regional and national tax and business conferences for CPAs and attorneys. He was the 2015 Recipient of the Oregon State Bar Tax Section Award of Merit.
