The House and the Senate are moving full speed ahead on their respective tax reform bills, but it’s clear the two chambers are far apart in their approach to taxation of pass-through income. While the Senate bill proposes a 17.4 percent deduction for qualifying pass-through income, the House bill taxes it at 25 percent.
Today, nearly 90% of U.S. businesses are pass-through entities that pay taxes through the individual returns of their owners. Yet, when it comes to taxation, pass-through organizations are treated differently than corporations.
Solutions to the pass-through tax reform issue clearly can be found in the hard details. Tax law must appropriately capture what is and isn’t business income from all pass-through entities and tax it at a uniform rate. Simultaneously, tax policy also needs to establish enforcement rules to reduce the ability of business owners to recategorize their wages as business income.
During Grant Thornton’s recent executive workshop, “Operating in a Changing Landscape,” the firm’s tax leaders shared insights about anticipated implications of tax reform
legislation on pass-through entities. The workshop is part of the year-long program series— Future Ready Business: Washington Impact
—developed in partnership with Bloomberg BNA to help businesses understand and prepare for sweeping tax- and regulatory-policy changes.
Learn key insights about the following aspects of proposed tax reform:
- Breaking down the 70/30 formula
- Inequities between pass-through and corporate taxation
- Tax reform impact on small businesses
- Considerations for making an entity choice
Watch the video below to hear compelling insights from Grant Thornton’s Jamie Fowler
, national managing partner, Tax Services; David Auclair
, national managing principal, Washington National Tax Office; Doreen Griffith
, national tax leader-advisory and growth, Tax Reporting and Advisory; as well as Steve Bell, former staff director for the Senate Finance Committee and senior advisor with the Bipartisan Policy Center.
Gain more insights: