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Is small business tax reform coming?

House Ways and Means Committee Chairman Dave Camp, R-Mich., has been busy drafting tax reform legislation. (See our last blog: Is a “fairer” tax in our future?) The committee is considering restructuring small business and pass-through entities’ taxes.

The small business and pass-through entity tax reform discussion draft offers two options to modernize the tax law. While Option 1 calls for revisions, Option 2 offers a new unified pass-through regime, and was met with mixed reviews.

Option 2 completely overhauls the tax rules applicable to subchapter S and partnership entities, and calls for a single set of rules to be applicable to these entities.

New York University Law School adjunct professor Willard Taylor applauded the suggested changes for all privately-held pass-through entities, citing tax implications as the major distinction between the different types of organizational structure.  He offered several suggestions for lawmakers to consider, including the need for uniformity of payroll tax rules among business types. 

Opposing Option 2, law firm McDermott Will & Emery, LLP’s Blake Rubin warned that the proposed changes would simply disrupt businesses. According to Rubin, complexity will increase for S-corporations and flexibility currently enjoyed by partnerships will decrease.  In his opinion, “Option 2 seems to combine the worst of both regimes.”

Whether you’re “pro” or “anti” reform, we’d love to hear your thoughts. Post a comment and share your opinion.  If you’d like to read the draft for yourself, you can find it here.

If you’ve got questions about these potential changes or any other tax questions, Patrick and Robinson CPAs is here for you.  Contact us at Office@CPAsite.com or 904-396-5400. 

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