In a newly released study, EY's Quantitative Economics and Statistics (QUEST) group partnered with the S Corporation Association to examine both the economic footprint of and the impact of the Tax Cuts and Jobs Act (TCJA) on the pass-through sector in the US economy, with a focus on large S corporations.

Key points

• In terms of economic impact, pass-through businesses comprise a significant share of economic activity, employ a majority of private sector workers (58%), and pay a significant share of all business taxes (51%).
• Large S corporations, defined here as those with 100 or more workers, employed 13.1 million workers, or 10% of the 133 million private sector workers in 2016. S corporations paid 20% of all business taxes.
• In terms of both effective and marginal tax rates, the analysis shows that prior to TCJA, large S corporations and C corporations faced similar tax rates. Rough parity remained following enactment of the TJCA. However, the sector will face significantly higher tax rates in 2026 than C corporations with the expiration of key TCJA provisions, such as the 20% Section 199A deduction for qualified business income.

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