The Ways & Means Committee today released another in a series of “discussion drafts” outlining their plans for tax reform. This latest draft focuses on how to tax pass-through businesses — those businesses organized as S corporations, partnerships, and sole proprietorships — under a reformed code.In response to the draft, the S Corporation Association today released the following statement:
“The S Corporation Association strongly applauds Chairman Camp and the Committee for their efforts.
The Chairman is committed to a comprehensive reform of the tax code, and he’s made clear that the Committee intends to conduct this reform in a transparent and interactive process. This means more work for them, but it also promises a better policy outcome for America’s businesses.
The Committee draft released today would improve the rules governing S corporations, making it easier for them to raise capital, manage their businesses, and transfer the business on from one generation to the next.
The S Corporation Association has a long history of supporting many of the provisions included in today’s draft, including making permanent the five-year holding period for built-in gains, expanding the ability of S corporations to have foreign shareholders, and reducing the harmful effects of the “sting” tax. Most recently, these provisions were included in the S Corporation Modernization Act (H.R. 892) introduced by Reps. Dave Reichert (R-WA) and Ron Kind (D-WI) last week.
While there are many details to work out, the draft presented today is an excellent start and we’re eager to work with the Committee and its Working Groups to construct the best possible framework for America’s small and closely-held businesses.”
Our plan for the next several weeks is to work with the pass-through business community to dive into the details and provide comments to the Committee and the Working Groups. Expect to hear more on this soon.
Small Business Survey Supports Comprehensive Tax Reform
Last week, S-CORP ally NFI released an impressive survey of small-business owners on the tax and spending issues before Congress. The survey can be found here.
Our main take-away is that the small business community strongly supports tax reform. NFI found that eight out of ten business owners support comprehensive tax reform while a similar number believe tax reform means lower rates applied to a broader base.
Moreover, business owners are ready to put their money (preferences) where their reform is by identifying specific tax items that should be repealed or paired back. The most popular preferences to reduce or eliminate include the mortgage interest deduction (73 percent), the employer-provided health insurance (57 percent) and tax-exempt bonds (47 percent).
Some other interesting points:
Thirty-four percent of owners have spent money planning for the estate tax while another 15 percent expect to spend money in the future. So much for the old saw that “nobody is affected by the estate tax.” If they’re not affected, why are all these business owners paying somebody to get prepared?
On the budget front, small-business owners are all about cutting spending. More than one-third favor balancing the budget through spending cuts only, while nearly two-thirds believe that spending cuts should make up at least 75 percent of the deficit reduction. This position fits with our recent letter to Congress supporting reforms to our entitlement programs and is consistent with the push for tax reform. Without entitlement reform, pro-growth tax reform is simply not possible.
Oh, and finally, 45 percent of NFI members are organized as S corporations! No wonder we work so well with them!