The Tax Cuts and Jobs Act of 2017 set forth new regulations for C-corporations. This ultimately led to other legislation that impacts S-corporations and other business entities in the United States.

As noted, as part of TCJA, Congress changed the tax-rate structure for C-corporations to a flat rate of 21% instead of the former graduated rates that topped out at 35%.

Needing a way to equalize the rate reduction for all taxpayers with business income, Congress came up with a deduction for businesses that are not organized as C-corporations, including S-corporations. It replaces the Sec 199 Domestic Production Activities Deduction.