Happy New Year! I am writing to thank you for your continued support of the S Corporation Association and the important work we do in defense of the S Corp community. As the incoming Chairman of the Association, I have lots of plans for 2012 that I want to share with you.
First, 2011 was a tough year for the stock and labor markets, but it was a productive year for the Association. As Congress began laying the groundwork for tax reform, we funded research exploring the vital contribution of flow-through businesses to jobs and investment in the United States, we nearly doubled our membership and we created a new S-CORP PAC (Political Action Committee) to help us support those members of Congress who support our S Corp champions.
Speaking of champions, in April, Ways & Means Committee members Dave Reichert (R-WA) and Ron Kind (D-WI) introduced the S Corporation Modernization Act of 2011 (H.R.1478) to modernize the outdated rules that apply to S corporations. The Reichert-Kind legislation makes it easier for S corporations to raise capital, invest in new buildings and equipment, and hire new workers. Among other items, the bill would permanently reduce the built-in gains holding period to five years allowing S corporations to access their own locked-up capital, increase access to capital by allowing non-resident aliens to invest in S corporations through small business trusts, reduce the negative impact of the so-called sting tax, and encourage charitable giving by S corporations by simplifying related rules.
Perhaps our biggest achievement this year was our Ernst & Young study documenting the impact of flow-through businesses on private sector jobs and economic activity in the U.S. The study proved to be an important tool for our allies on Capitol Hill, arming them with the information and statistics they need to defend Main Street businesses, particularly in the context of tax reform. And while the study released last year was a good start, more is needed to defend S corporation employers as policymakers contemplate restructuring the tax code – more studies, more education, more ally recruitment in the business community and on the Hill.
With that in mind, for 2012 we have asked Ernst & Young to conduct another study for us, this time focusing on the pending rate hikes scheduled for 2013. Unless Congress acts, tax rates on S corporations and other pass-through businesses are set to rise from 35 percent to 45 percent and beyond. It is important for policymakers to understand the employment and investment implications of this unprecedented tax hike on employers. We expect this study will arm our allies with the facts they need to win this fight.
Other priorities for 2012 include improving the rules that govern how S corporations operate. Therefore, we will be fighting for built-in gains reform, non-resident alien relief, and other reforms included in our S Corp Modernization bill. The bill has been introduced in the House and we expect a companion bill in the Senate soon. If Congress moves tax legislation this year, we expect our provisions to be under active consideration.
For the PAC, we expect to build on last year’s success by broadening both contributions to the PAC and donations to our allies in Congress. Fundraisers are already scheduled for early 2012 for our S Corp champions, and more will be on the way.
Those are the S Corporation Association goals for 2012, but to accomplish them, we’re going to rely more than ever on our members and their active participation. What can you do to help?
- Renew your membership for 2012. S-CORP is not flashy, and we don’t have lots of bells and whistles. What we do have is great advocacy, and advocacy starts with our members. Renew today!
- Spread the word. Our best ambassadors and recruiters are our members. Let other private businesses in your community know about S-CORP and the important work that we do.
- Contribute to the S-CORP Political Action Committee (PAC) to ensure our S corp champions can help us keep fighting and winning in Congress. It is important that we get widespread support from our membership at any level and it is imperative that we support those members that support S corporations.
I am deeply appreciative of your support and look forward to working with you in 2012 to defend the greatest tool ever invented for private enterprise — the S corporation.
Chairman, The S Corporation Association
Executive Vice President, McIlhenny Company