This week the House Committee on Small Business held a hearing to consider reforms that would promote equality and growth for S corporations. Rick Klahsen, a member of the S Corporation Association’s Board of Advisors testified on our behalf.
Rick’s testimony reviewed the dramatic growth of S corporations over the last half-century and identified critical reforms Congress should consider to improve the S corporation rules and level the playing field with LLCs.
As S Corp readers know, we are fortunate to have active champions in the House and Senate ready to make the case for S corporation reform. One of those champions, Representative Ron Kind (D-WI), also submitted testimony making the case for his legislation, HR 4840, the “S Corporation Modernization Act of 2007.”
Both Chairwoman Melissa Bean (D-IL) and Ranking Member Vern Buchanan (R-FL) have small business backgrounds and demonstrated a detailed understanding of the challenges b�s small business community faces in coming years. We look forward to working with them and the other members of the Small Business Committee to see these important reforms enacted.
More Tax Bills in the House and Senate
Congress had another busy week debating tax bills in the House and Senate, but it in the end it likely came to naught.
On Wednesday, the House Ways & Means Committee approved legislation to protect millions of taxpayers from paying the Alternative Minimum Tax. This legislation is expected to be taken up by the full House next week and should pass by a large, albeit partisan, margin. From there, however, its future is shaky.
Under the Committee-passed bill, AMT exemption levels would increase to $46,200 for individuals and $69,950 for couples, protecting approximately 20 million taxpayers from having to pay the AMT this year.
In another indication of tax fights to come next Congress, the bill is fully offset with half-a-dozen tax increases, including raising tax rates on so-called “carried interest,” excluding large oil companies from using the section 199 manufacturing deduction, and requiring credit card companies to report transactions by small businesses.
As with past efforts, the members of the Senate and the White House have made clear they oppose offsetting the cost of extending current AMT policy.
As if to confirm that point, the Senate failed to get the necessary 60-votes on Tuesday to move legislation that combined the AMT patch and an extension of expiring tax and energy provisions. Once again, the main points of difference in the 52-44 vote were the provisions to offset the revenue impact of the bill. Competing press releases sent out by Senators Baucus and Grassley do an excellent job of identifying the impasse.
Baucus: Senators who voted against this bill have once again disappointed millions of working American families that depend on these tax credits and incentives for protection against the alternative minimum tax, real help in paying high college tuition and otherwise making ends meet. This vote is a disappointment to all corners of the business community that rely on the research and development tax credit and other tax relief that helps them remain competitive at home and abroad.
Grassley: The right thing to do right now is to vote “no” on this cloture motion. The sooner we can get the Democratic leadership to stop driving the truck over a cliff the sooner we can get to work on an extenders bill. That bill, unlike the bill before us now, will pass both houses of Congress and be signed by the President. This law change will protect additional families from being captured by the AMT. Right now, the Democratic leaders are in the driver’s seat. I hope eventually they decide to drive responsibly. Vote no on the motion to proceed. Put the Senate back on a path to a real AMT patch and extenders bill that will become law.
As before, your S-Corp team expects that both the AMT and expiring tax provisions will be addressed by Congress before the end of the year without offsetting the revenue impact.B The votes in the Senate over the past months has demonstrated it cannot pass offset bills, and the President has made his opposition clear as well.B Just how long it takes to get there, however, is unclear.B A post-election session is very much a possibility.