The 2004 American Jobs Creation Act contained numerous S Corp friendly provisions, including increasing the number of allowable S Corp shareholders from 75 to 100 and expanding the definition of a single shareholder to include large families.
According to BNA, the IRS is actively considering issuing additional guidance for some of the provisions (Sections 231 through 240 of the bill), including additional guidance on Section 231 of the Act, which defines which members of a family may be treated as a single S corporation shareholder. This additional guidance was part of the IRS’s business plan for 2005/2006 business year, which ends June 30th. Look for the new guidance sometime around then.
For the JCT Summary of the American Jobs Act: http://www.house.gov/jct/x-69-04.pdf
House Committee on Ways and Means Begins Corporate Tax Reform Hearings
S-CORP continues to monitor the possible impact - harmful or otherwise — corporate tax reform proposals could have on the taxation of S corporations. As S-CORP members will recall, the President’s tax reform panel recommendations issued last fall proposed to apply a new entity-level tax on S corporations and partnerships. Under the panel’s Simplified Income Tax Plan, all businesses with more than $10.5 million in receipts would be subject to a 31.5 percent entity-level tax, thus ending the unique pass-through structure that Congress intended when S corps were created over 50 years ago.
The Department of Treasury has been reviewing the panel’s proposals and is expected to pass on its own version to President Bush sometime in the future - likely after November. In the meantime, Congress continues to consider tax reform. On May 9th, the Ways and Means Subcommittee on Select Revenue Measures will hold a hearing to -examine the current U.S. corporate tax system and the base upon which taxes are imposed.
S-CORP will be engaged throughout the debate on tax reform and continue our efforts to preserve and protect your S corp business.
S-CORP Supports “Small Business Flexibility Act”
This week, S-CORP sent a letter to Senators Olympia Snowe (R-ME), Blanche Lincoln (D-AR) and Representatives Clay Shaw (R-FL) and John Tanner (D-TN) in support of their bill, the Small Business Flexibility Act. This legislation (H.R. 4006, S. 2462) would allow start-up S corporations to elect taxable years other than the calendar year. The calendar year is a huge challenge for CPAs and the bill will help give new S corporations increased access to their CPAs and greater flexibility to choose a financial year-end that corresponds with their business cycle.