November has been an active and exciting month for the S Corporation Association and we have much to be thankful for:
- TWO S corporation modernization provisions approved by the Senate as part of a larger tax package
- Efforts to oppose increased payroll taxes on S corporations continue to be successful
- Congressman Clay Shaw along with Congressman Jim Ramstad introduce S corporation reform legislation in the House
- Joint Committee on Taxation estimates revenue loss on built-in gains tax relief legislation
Before adjourning for a three-week recess, the Senate approved its reconciliation tax package that includes two provisions from the Subchapter S modernization and reform bill that we have been working on: increasing the 25% passive income threshold to 60% and eliminating the rule terminating S corp election if an S corp has excess passive income for three consecutive years AND allowing entities donating S corp stock to charitable organizations to receive a deduction for its fair market value.
Senators Blanche Lincoln (D-AR) and Orrin Hatch (R-UT) worked diligently with us to have this passive income relief included and we are continuing to aggressively work this issue to have this provision signed into law this year. We are mobilizing other trade associations with S corp members and interests for a meeting on November 29th to engage their help with our strategy to take the sting out of the sting tax. Please let me know if you have a specific interest in this provision and if you would like to participate in the meeting by phone.
We are also extremely pleased to report that last Friday, Representatives Clay Shaw and Jim Ramstad introduced the Subchapter S Reform Act in the House. We will now work to add cosponsors to the bill. We hope this will give us momentum once the House approves its tax reconciliation bill (that is limited to basically extending expiring tax provisions and does not include S corp provisions) and the very different Senate and House bills head to a Senate House conference committee, so that the S corp provisions in the Senate bill survive the conference and can be signed into law.