The Senate confirmed Scott Bessent to run the Treasury Department yesterday, which means there’s a new sheriff in town. That’s good news for the millions of Main Street businesses targeted by the Biden Administration for higher taxes and more onerous regulations.
But Main Street didn’t have to wait for Bessent’s confirmation to see how the landscape has changed under Trump. We’ve already seen material differences that promise relief now and in the future.
Example one is their approach to Europe’s Pillar 2 minimum tax campaign. Pillar 2 is a poorly disguised effort by the EU to target large US multinationals for more tax, but it has Main Street implications too. Here’s what we told the Global Competitiveness Tax Team last fall:
The current plan includes a carve-out for business income in the US that passes through to a taxpayer when the taxpayer pays a sufficiently high effective tax rate. For those pass-through businesses, they effectively would be exempt from the proposed Pillar 2 minimum tax regime.
The carve-out, however, only applies if the direct shareholder of the pass-through entity pays tax, either as an individual or a trust (such as an ESBT). In situations where an S corporation has trust ownership where the trust is not taxed directly — such as a grantor trust where the grantor pays the tax rather than the trust – the taxes paid by the indirect owner would not count towards the minimum tax, so a family businesses with trust ownership would be at increased risk of paying the Pillar 2 top-up taxes.
There is an additional challenge. Most S corporations with foreign operations make a check-the-box election to treat their foreign subsidiaries as branches and thus all the branch income – less applicable foreign tax credit offsets – flows onto the S corporation return and is taxed at the shareholder level. As currently drafted, however, this foreign subsidiary income is not eligible for the carve-out referenced above where the direct owner of the S corporation is a taxpayer….
Finally, in an issue that affects both S corporations and C corporations, it is unclear whether any Pillar 2-type minimum tax payments would be credited against the company’s US tax liability, as are other foreign taxes paid by US businesses. Ensuring that a business receives credit for the foreign taxes it pays is a critical means of ensuring US businesses are not penalized for operating overseas.
So Main Street businesses with oversees income were at risk of double taxation under Pillar 2. What’s the Trump Administration doing to protect them? Pulling out of Pillar 2. Here’s what the Executive Order issued on January 20 says:
The OECD Global Tax Deal supported under the prior administration not only allows extraterritorial jurisdiction over American income but also limits our Nation’s ability to enact tax policies that serve the interests of American businesses and workers. Because of the Global Tax Deal and other discriminatory foreign tax practices, American companies may face retaliatory international tax regimes if the United States does not comply with foreign tax policy objectives. This memorandum recaptures our Nation’s sovereignty and economic competitiveness by clarifying that the Global Tax Deal has no force or effect in the United States.
Amen to that.
Example two is FinCEN’s recent announcement that it will not challenge a court order blocking enforcement of the Corporate Transparency Act. S-Corp readers know firsthand the roller-coaster of actions by the courts and FinCEN over the past two months, during which the filing deadline was blocked, then stayed, then blocked again, etc. This legal carnival ride over the holidays was harming tens of millions of businesses, but didn’t seem to bother the previous administration. They were determined to implement the CTA regardless of the cost.
No more. Under Trump, the Treasury Department and FinCEN are acting like adults and pausing enforcement until the courts can run through the eleven federal cases challenging the law’s legitimacy. Here’s the announcement:
On January 23, 2025, the Supreme Court granted the government’s motion to stay a nationwide injunction issued by a federal judge in Texas (Texas Top Cop Shop, Inc. v. McHenry—formerly, Texas Top Cop Shop v. Garland). As a separate nationwide order issued by a different federal judge in Texas (Smith v. U.S. Department of the Treasury) still remains in place, reporting companies are not currently required to file beneficial ownership information with FinCEN despite the Supreme Court’s action in Texas Top Cop Shop. Reporting companies also are not subject to liability if they fail to file this information while the Smith order remains in force.
So business owners can return to running their businesses while the courts do their work. How rational.
A final example of how the policy winds have shifted comes from Bessent’s nomination hearing. Under Biden, the focus was on how to raise taxes. Under Trump, its how to keep them low. Here’s the new Secretary:
As we begin 2025, Americans are barreling towards an economic crisis at year’s end. If Congress fails to act, Americans will face the largest tax increase in history, a crushing $4 trillion tax hike. We must make permanent the 2017 Tax Cuts and Jobs Act and implement new pro-growth policies to reduce the tax burden on American manufacturers service workers and seniors. I have already spoken with several members of this Committee, as well as leaders in the House about the best approach to achieving these important goals together.
So lower taxes, less silly regulation, and a stronger defense of our economic interests overseas. It’s early, but clearly a good start for Main Street.