Just before Congress left for the holiday break, Congressman Ron Kind (D-WI) introduced legislation to help improve the rules under which S corporations operate. The bill, H.R. 4840, is entitled the “S Corporation Modernization Act of 2007″ and was cosponsored by a strong bipartisan set of members, including Representatives Jim Ramstad (R-MN), Stephanie Tubbs Jones (D-OH), Allyson Schwartz (D-PA), Phil English (R-PA), Sam Johnson (R-TX), and Steve Kagen (D-WI).
Congrats to the Kind office for introducing this important legislation and putting together this impressive list of cosponsors. Given that most of our S corporation challenges are tax-related, the fact that six of these cosponsors are also members of the powerful Ways and Means Committee is particularly important.
In addition to the S Corporation Association, seven other national business organizations have endorsed the legislation, including the National Federation of Independent Business, the American Council of Engineering Companies, the Associated Builders and Contractors, the Associated General Contractors of America, the National Beer Wholesalers of America, the Independent Community Bankers of America and the Printing Industries of America.
The bill itself includes reforms important to keeping S corporations competitive in coming years, including built-in gains reforms, expanding S corporation ownership through small business trusts and relief from the so-called “sting tax” passive investment rules. As the “Dear Colleague” letter Representatives Kind and Ramstad circulated yesterday outlining the legislation noted:
“Absent change, America’s 3.8 million S Corporations will be handcuffed with outdated rules that hinder their ability to grow and create jobs. That is why we recently introduced, along with our colleagues Reps. Stephanie Tubbs Jones, Sam Johnson, Schwartz, English, and Kagen, H.R. 4840, the S Corporation Modernization Act of 2007. Our legislation would make needed changes to the tax code to keep S Corporations competitive and would help ensure the continued success of America’s predominant small business model by:
Modernizing the rules that apply to firms that have selected S corporation status;
Increasing the ability of S Corporations to access needed capital; and
Encouraging S Corporations to support charity through small business trusts.
These reforms would improve the ability of S Corporations to broaden their ownership and remove impediments that prevent them from competing on a level playing field here in the United States.”
On the Senate side, Senators Lincoln and Hatch have been working on a companion bill. S-Corp is looking forward to seeing that legislation introduced in the coming session. Given the strong support of these offices on S corporation issues in the past, we believe it is safe to say the S corporation community has never had a more active and broad based set of friends on Capitol Hill.
How can you help? S corporations are going to need all the highly-placed friends they can find in the coming years. Let your members of Congress know how these reforms are important to the success of your business and your ability to continue to grow and create jobs, and ask them to cosponsor HR 4840 as well.