Qualified Business Income Deduction

Last Updated: January 20, 2026

The Issue

When the President signed the One, Big, Beautiful Bill (OBBB) into law on July 4, it locked in significant tax reform for businesses organized as pass-through entities.

Most U.S. convenience store companies are small family businesses that pay their business income taxes via their owner’s personal income tax filings. The income passes through the owner, hence the pass-through moniker. Those types of businesses, also referred to as s-corporations, would have faced a massive tax increase at the end of 2025 if Congress had failed to act.

Provisions of the 2017 Tax Cuts and Jobs Act tax law that lowered the individual rates and created the 199A Qualified Business Income Tax Deduction were scheduled to expire on December 31, 2025. Businesses would have faced paying a rate around 39% on their business income. This would have been doubly problematic as it would have put pass-through entities at a significant competitive disadvantage to their corporate competitors, whose lower (21%) tax rate does not expire.

The OBBB forestalled that tax cliff by making the 199A deduction and the lower individual rates permanent, meaning that pass-through entities now have the certainty of near parity with their corporate competitors and can plan accordingly.

Retail Impact

Most convenience retailers are organized as pass-through entities. If the 199A deduction expires, pass-through entities would pay federal income tax rates as high as 37% or 39.6% if the individual rates section of the 2017 tax law expires. Meanwhile, competitors organized as c-corps would continue to have a 21% tax rate. This disparate tax structure could be detrimental to many family businesses.

NACS Position

NACS supports the permanent extension and expansion of the 199A tax deduction for pass-through entities included in the House version of the 2025 reconciliation package.