The Washington Wire - The S Corporation Association

199A Essential to Rate Parity

Since the Tax Cuts and Jobs Act’s passage at the end of 2017, some have seized on the Section 199A deduction as a “loophole” that stacks the deck in favor of pass-through businesses.

We’ve heard – and responded to – various criticisms of the provision over the years. But the brief Twitter exchange below caught our eye:

It’s an interesting question, but is the premise correct? Is the tax bill for the independent contractor (IC) really 20 percent lower than the employee?

Keep in mind that an employee making $50,000 …

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admin2021-03-24T12:59:40+00:00March 24, 2021|

Razorbacks Roll with SALT Parity

We can’t predict victory for the University of Arkansas’s basketball team in March Madness (Seeded 3^rd in the South) but the state’s pass-through business owners are already winners, as the state officially became the ninth state to adopt our SALT Parity reforms yesterday. Governor Asa Hutchinson signed House Bill 1209 into law just last night.

The new law allows owners of pass-through businesses – including S corporations and partnerships – to elect to pay their state taxes at the entity level, rather than having the business’s income flow through to the individual owners.

By way of background, deductions on state and …

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admin2021-03-18T11:47:24+00:00March 17, 2021|

Income Inequality and S Corporations

Whether they like it or not, S corporations and other pass-through businesses are at the heart of the income inequality debate that has been raging in economic circles for the past two decades. That’s because the shift of economic activity from traditional C corporations to the pass-through sector since 1986 has skewed the income data, making it look like the wealthy gained more than they really did.

The case for growing income inequality has been under scrutiny for years now, at least in academic circles. Numerous papers have revealed the flawed data and assumptions underpinning the work of Piketty, Saez, and Zucman, among …

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admin2021-03-08T19:33:05+00:00March 8, 2021|

S-Corp Testifies on Michigan SALT Parity Legislation

S Corporation Association President Brian Reardon testified this week – via Zoom – before the Michigan House of Representatives’ Tax Policy Committee. The subject of the hearing was H.B. 4288, which would permit electing pass-through businesses to pay their state and local tax (SALT) at the entity level, thus enabling them to fully deduct these expenses on their federal returns. Click the screenshot below for a video of Brian’s testimony:

Brian kicked off his testimony with a presentation (available here) on how Michigan taxpayers would benefit from enactment of H.B. 4288. …

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admin2021-03-07T14:09:10+00:00March 4, 2021|

Main Street Supports 199A Permanence

More than 80 business groups signed on to support legislation making permanent the 20-percent pass-through deduction (Section 199A). The bill was sponsored by Steve Daines (R-MT) in the Senate and Jason Smith (R-MO) and Henry Cuellar (D-TX) in the House.

The 199A deduction was a key part of the Tax Cuts and Jobs Act, enacted in 2017. The deduction was designed to balance out the tax treatment of pass-through businesses with the lower, 21-percent tax rate paid by C corporations. As our EY study from the time made clear, the deduction works to help level the playing field, but only for those …

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admin2021-03-05T18:45:54+00:00February 26, 2021|