Earlier today, the House Ways and Means Committee voted out a number of business-friendly tax provisions, including two S corporation reforms introduced by Reps. Dave Reichert (R-WA) and Ron Kind (D-WI). You can click here to watch the video of the markup in its entirety.
The first bill (H.R. 4453) makes permanent a five-year built-in gains recognition period while the latter (H.R. 4454) does the same with a basis adjustment for charitable giving by S corporations. Both provisions were included in Chairman Camp’s tax reform draft and were voted out of Committee with comfortable majorities.
In a related effort, two dozen industry groups and trade associations wrote to the Ways and Means Committee members in support of permanent BIG tax relief, including the National Federation of Independent Business, the National Wholesalers, the American Trucking Associations, and the S Corporation Association. As the letter to the tax committee states:
Locking up a company’s capital for an entire decade is simply unreasonable. Past Congresses have recognized that a decade is too long and voted to reduce the recognition period on three separate occasions, but those temporary measures have expired and the 10-year rule is back in effect.
Enacting a permanent shorter recognition period would sustain the original intent of the rule while providing S corporations with much needed certainty. It would allow them to make decisions based on what is best for the company rather than the dictates of the tax code. At a time when our economy badly needs increased investment, allowing more companies to access their own, locked-up capital is an important step.
As for next steps, we understand the House plans to take up some or all of the six tax bills voted out today sometime in May.
Meanwhile in the Senate, Majority Leader Harry Reid says he wants to bring an extenders bill to the floor in the next month, but exactly how he is able to bring Republicans (and some members of his own party) along is unclear. The big hurdle here is how he plans to handle amendments. Given the dearth of amendable tax bills in recent years, Members will be itching for the opportunity to offer amendments to the extenders package. How to manage the onslaught while protecting vulnerable Senators from difficult votes will be the challenge.
Given that challenge, the odds for action on extenders still favor movement sometime after the election, but each tangible step forward, like today’s successful markup, increases the chances that something happens sooner. That’s good news for S corporations sitting on locked-up assets, and its good news for good tax policy too.