Hatch says corporate integration proposal may not be ready until May

Tax Hot Topics - Hatch says corporate integration proposal may not be ready until MaySenate Finance Committee Chair Orrin Hatch, R-Utah, acknowledged last week that his corporate integration proposal is running into difficulties that will postpone its release until at least May.

Hatch is trying to reduce the double tax on corporate earnings by providing a deduction at the corporate level for dividends paid to shareholders. Hatch would then apply a higher rate on the dividend income for the shareholders themselves and is considering imposing withholding.

The proposal is being scored by the Joint Committee on Taxation, and Hatch acknowledged that the complexity and ambition of the proposal is creating revenue issues. It may be difficult to keep the plan revenue neutral because so many corporate shareholders are tax-exempt entities like pension plans, although a withholding tax could address this issue. Hatch is also discussing applying withholding to interest income to maintain parity between debt and equity financing.

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