Congress has returned from a weeklong recess and once again will attempt to finish last year’s tax business: a $70 billion tax cut bill (the “reconciliation” bill) and a pension reform bill. The S Corporation Association (“S-CORP”) continues to work with congressional tax-writers to include a Senate-passed provision to provide “sting tax” relief for S corporations subject to double taxation at the highest corporate rate in the tax reconciliation bill. S-CORP salutes Senator Blanche Lincoln (D-AR) for leading a bicameral and bipartisan letter that was sent last night to the House and Senate conferees.
The letter urges House and Senate conferees to retain the Senate language that, among other things, modifies the current excess passive income rules by increasing the threshold for taxing excess passive income from 25 percent to 60 percent and eliminates the rule that would terminate a company’s Subchapter S status for having excess passive income for three consecutive taxable years. Members signing the letter include Senate Finance Committee members Orrin Hatch (R-UT) and Gordon Smith (R-OR); Senate HELP Committee Chairman Mike Enzi (R-WY); and, House Ways and Means Committee Members Jim Ramstad (R-MN) and Phil English (R-PA) in addition to Small Business Committee Chairman Don Manzullo (R-IL).
S-CORP Chairman Tom McMahon said, “We are deeply grateful for the work of Senators Lincoln, Hatch, and Smith to pass legislation that will free S corporations from outdated and obsolete rules that either double tax our business income or lock up our capital and place us at a competitive disadvantage.” He added, “We are pleased that this provision has garnered bipartisan support and hope that Congress will soon pass a final conference report that will help America’s small and family-owned businesses grow and prosper free of the risks and constraints of the “sting tax.”
Congress will be in session for two weeks of legislative business before a two-week Easter recess. It is unclear whether the House Senate Conference Committee working on the final tax bill will be able to complete action on the bill in this time. Immigration and lobbying reform top the Senate’s priority list for Senate Floor action during this time period. The House agenda is more open and would allow time for consideration of a conference report.