Last week we previewed the Midterm elections and shared our thoughts about how things will likely shake out. Today we’ll take a look at how those results will impact tax policy in the lame duck and beyond, with a focus on what it all means for the S corporation community.

Lame Ducks Tend to be Lame

Let’s begin with the bottom line – we don’t expect much from this lame duck.  There’s been lots of chatter about a litany of bills and other priorities that could move in the weeks following the midterms, but that always seems to be case and …

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The elections are less than a month out, and the implications for S corporations are huge.  If Democrats retain control, we can expect two more years of policy risk, with the threat of higher rates and increased estate tax levies looming large. If Republicans take either the House or the Senate, we can expect two years of divided government, with limited opportunities for tax policy to move and the focus shifting to the policy cliff taking place at the end of 2025.

So what will it be?  Here’s how we think things will play out.

Macro Trends

Let’s start with macro trends. Earlier …

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The S Corporation Association joined with dozens of associations today to oppose the ENABLERS Act, legislation that would adversely affect millions of businesses, charities, and foundations, as well as their employees and investors. More than 75 organizations signed onto the effort, including NFIB, the American Farm Bureau Federation, the U.S. Chamber of Commerce, and the Real Estate Roundtable.

The ENABLERS Act seeks to dramatically expand the reporting requirements put in place by the Corporate Transparency Act, despite the fact that final regulations under the CTA were just released today with a delayed effective date of 2024.

S-Corp initiated this effort …

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We’ve been skeptical of grandiose promises to close the so-called tax gap for years (here, here, here).  Part of that skepticism stems from the blatant self-interest of those making the estimates – we could raise billions, trillions, quadrillions if only you gave us more money! (Perhaps the CRS or JCT could be in charge of making these estimates in the future?)

Last week’s piece from The Hill is a perfect example.  Under the breathless headline, “Lucrative IRS program targeting wealthy tax cheats is withering from a lack of funds,” the article reveals many things, none of which …

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