The Impact of IRC § 199A on the Value of Non-Publicly Traded Business Organizations

The objective of this paper is to assess the influence of tax reductions from the Tax Cuts and Jobs Act (“TCJA”), on the firm value of non-publicly traded business organizations. The TCJA provided a reduction in the graduated corporate tax from a top rate of 35% to a flat 21%, while simultaneously providing up to a 20% deduction of taxable income produced by passthrough entities under Internal Revenue Code (“IRC”) § 199A. While the overall value of non-publicly traded businesses increased after the TCJA, we find somewhat mixed results.