I found you these resources:

"For firms structured as passthrough entities, the deduction at the entity level reduces the owners’ aggregate tax basis in the entity interest. This deduction, however, does not consume cash. (Consider it a “free” deduction.) The entity has the same cash available for distribution to its owners, but the owners’ tax bases in the entity have been reduced due to the passthrough deduction. Ultimately, the owners will have capital gain from receiving distributions in excess of tax basis (Sec. 704(d) for partnerships and Sec. 1366(d) for S corporations). The effect of Sec. 179D: A “free” current ordinary deduction is provided to the designer at the cost of a future capital gain. Sec. 179D provides a benefit to the designer, but it is not as much of a benefit as it initially appeared.

For designers structured as S corporations, the possibility exists that the S corporation has accumulated earnings and profits from a C corporation year. The Sec. 179D deduction reduces the accumulated adjustments account, thereby causing cash distributions to be dividends to the extent of accumulated earnings and profits.

The IRS Office of Chief Counsel released legal memorandum AM 2010-007 on December 23, 2010, discussing the issue. The memorandum states:

We understand that a growing number of [owners of passthrough entities] . . . have taken the position that this deduction is available to the [owners] without regard to the basis limitation rules contained in §§ 704(d) and 1366(d), either on the theory that the deduction is a partner or shareholder level deduction, or because the basis limitations of §§ 704(d) and 1366(d) and basis adjustment rules of §§ 705(a) and 1367(a) simply do not apply with respect to the §179D deduction.

The memorandum proceeds to give the Office of Chief Counsel’s position with respect to such arguments, stating that the Sec. 179D deduction, “like any other partnership or S corporation item of deduction,” reduces the owner’s tax basis in the ownership interest. Examples of the effect are provided."

https://www.walkerreid.com/learn-about-179d/

www.walkerreid.com/wp-content/uploads/2015/07/Mem-2010_007-LLC.pdf