199A EY Study: Briefing Recap & Recording
Earlier this week S-Corp hosted a briefing to present the results of its latest study, which illustrates just how much economic activity is supported by the Section 199A deduction. The event featured Bob Carroll, Co-Director of EY’s US National Tax Quantitative Economics and Statistics Group (QUEST) and author of the new report, who walked through his findings. (Click here to watch a replay of the briefing.)
The key takeaway is that Section 199A supports 2.6 million jobs, drives $161 billion of employee compensation, and is responsible for $325 billion of GDP. Conversely, if 199A is allowed to expire at the end of next year as currently scheduled, it would put these jobs – which make up a sizeable portion of the private-sector workforce – at risk, along with the economic expansion the provision has engendered.
Also on hand at the briefing were Caroline Oakum, tax counsel for Senator Steve Daines (R-MT) and Noelle Britton, deputy chief of staff for Congressman Lloyd Smucker (R-PA). The two offices are the lead sponsors of the Main Street Certainty Act (S. 1706 / H.R. 4721) to make the Section 199A deduction permanent.
In an accompanying press release, those offices offered broad support for the study and its importance to the fight to make 199A permanent:
“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. 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 Rep. Lloyd Smucker (PA-11), a member of the tax-writing Ways and Means Committee and lead sponsor of the Main Street Tax Certainty Act in the House.
“It’s no surprise that when we provide our small businesses with 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,” Senator Daines said.
On behalf of the 95 percent of businesses operating as pass-throughs, thank you to Representative Smucker and Senator Daines for their unwavering commitment to preserving Section 199A, and thank you to Bob Carroll and the team at EY for another excellent report. As we approach the 2025 fiscal cliff, S-Corp will continue to arm our allies with the information they need to win this important battle for Main Street.
S-CORP Briefs Tax Team on 199A Study
Earlier today S-CORP President Brian Reardon was on Capitol Hill to brief members of the Main Street Tax Team on our new study that quantifies the economic footprint of the Section 199A deduction.
Congressman Lloyd Smucker, Chair of the Main Street Tax Team and lead sponsor of our 199A permanence bill in the House, led the meeting and was joined by Representatives Ron Estes of Kansas, Greg Murphy of North Carolina, and Kevin Hern of Oklahoma. Representative Murphy recently hosted us for a roundtable event in his home state of North Carolina while Kevin Hern is a former business owner and employer, so the group was well prepared to hear the details of the new study.
In addition to the S-Corp testimony, Members and staff heard from other business groups, including the American Council of Engineering Companies, Nareit, and the Energy Infrastructure Council, all representing critical industries that support making Section 199A permanent.
The S- Corp study conducted by EY demonstrates that the total economic activity supported by the deduction is broad and meaningful. The numbers are staggering – the study found that Section 199A supports 2.6 million jobs, contributes $161 billion to employee compensation, and adds $325 billion to GDP.
With the Section 199A deduction scheduled to expire at the end of next year, the threat is clear. All those jobs will be put at risk if Congress fails to act and sends us over the fiscal cliff. The result would be less employment, lower wages, and a smaller economy.
Thank you to Chairman Smucker and the Members and staff who gathered today to hear this important message, and we look forward to working with you to get the word out on the importance of Section 199A.
Click here to download the full study
Millions of Jobs at Risk without Section 199A
Today, S-Corp released its latest study in support of the Section 199A deduction for small and family-owned businesses. Authored by Robert Carroll at EY, the study focuses on the economic footprint of the 199A deduction and answers the question: “Just how much economic activity is supported by Section 199A?”
You can access the full report here: As it states:
This report estimates the US economic activity – jobs, employee compensation, and gross domestic product (GDP) – supported by the Section 199A deduction in 2024. Specifically, this analysis provides a snapshot of the economic activity supported at businesses directly benefitting from the 199A deduction, as well as the economic activity connected to this economic activity (i.e., related supply chain activity and consumer spending).
What did EY find?
According to EY, Section 199A supports 2.6 million jobs, contributes $161 billion to employee compensation, and adds $325 billion to the national economy. This table summarizes the study’s findings:
Regarding jobs, the study finds Section 199A supports 1.1 million jobs directly, 590 thousand jobs through increased employee compensation, and another 853 thousand jobs from related consumer spending increases:
These results highlight the importance of Section 199A and how the expiration of the deduction threatens these jobs. Absent congressional action, 2.6 million jobs will be at risk.
To put these numbers in perspective, there are 140 million private sector jobs, of which 88 million (or 62 percent) are located at pass-through businesses (the businesses eligible for Section 199A). Allowing Section 199A to expire would put more than three percent of all pass-through jobs and nearly 2 percent of all private-sector jobs at risk.
Bottom Line:
- The Section 199A small and family business deduction supports 2.6 million jobs in the United States.
- Allowing 199A to sunset puts all those jobs at risk, resulting in less employment, lower wages, and a smaller economy.
- Congress needs to protect Main Street and the people who work there by adopting the Main Street Certainty Act and make permanent the 199A deduction.
These results will become a key part of our 199A advocacy campaign moving forward as Congress works to avoid next year’s fiscal cliff.
Main Street Backs Bipartisan CTA Delay Bill
Today the S Corporation Association joined with 150 of its trade association allies to support legislation to delay the Corporate Transparency Act’s year-end reporting deadline.
The bill, H.R. 9278, was introduced by Iowa Congressman Zach Nunn (R) and enjoys bipartisan support. Its purpose is straightforward – provide much-needed relief to tens of millions of small businesses and other entities subject to the CTA’s reporting requirements. As the letter notes:
The CTA is unique in that it explicitly targets the very companies least equipped to shoulder its regulatory burdens. Among its various exemptions, the statute includes a carve out for entities whose revenue exceeds $5 million and which employ more than 20 full-time employees. Companies not meeting those thresholds – essentially every small business currently operating in America today – must comply. FinCEN estimates that more than 32 million such entities will be affected by the new law just this year, with an additional 6 million each subsequent year as new businesses are formed.
Although filing under the CTA began at the start of this year, FinCEN reports it has received just 10 percent of required submissions. This compliance rate can be attributed directly to the general lack of awareness among the small business community when it comes to the new rules. Given this massive education gap, it is clear additional time is needed for regulators and other stakeholders to continue their outreach to affected small businesses.
The Nunn bill is in keeping with legislation (H.R. 5119) passed by the House last year in a near-unanimous vote of 420-1. So why the need for another bill?
Despite that overwhelming show of support, H.R. 5119 remains stalled in the Senate due to opposition from Banking Committee Chairman Sherrod Brown (D-OH). At this point the senator is the only thing standing between 30 million small businesses and a one-year reprieve from the CTA’s onerous reporting requirements.
While the courts may ultimately save the day and strike down the CTA for good, the Main Street business community can’t afford to sit idly by and wait for that outcome. The delay effort is important because it would allow the legal process to play out in full, while giving federal regulators additional time to educate businesses about the new law. It’s a win-win, commonsense approach to this challenge.
North Carolina Roundtable Highlights 199A
Earlier today members of the Main Street Employers Coalition met for a roundtable event in Greenville, North Carolina, hosted by Congressman Greg Murphy. The gathering was part of a broader House Ways & Means Committee initiative to solicit input from the business community as lawmakers develop legislative solutions to avert the 2025 fiscal cliff. It also comes on the heels of similar events with Congressman Smucker in Pennsylvania and Congressman Steube in Florida.
The event took place at East Carolina University and drew a diverse group of local business owners. Among the industries represented were distribution, farming, construction, and real estate, just to name a few, all of whom are unified around a singular goal: making permanent the Section 199A deduction. Participants shared their perspectives on the significance of the provision, as well as their firsthand accounts of how it has enabled them to reinvest in their businesses and local communities.
The event highlighted the critical importance of individually and family-owned businesses organized as pass-throughs, which supply a large majority of jobs in Murphy’s district and rely on the provision. According to data from EY, pass-throughs employ nearly 70 percent of private sector workers in the North Carolina third congressional district, yet face significantly higher rates with the expiration of 199A come the end of next year. Meanwhile, publicly-traded corporations, whose lower 21 percent rate was made permanent, employ fewer than one out of every ten jobs in the district.
S-Corp and its allies appreciate Congressman Murphy’s attention to this critical issue, and are grateful to him for hosting this important event. We look forward to participating in many more of these across the country in the coming months and getting the word out about the importance of Section 199A.