Issues & AdvocacyFederal
Key Senator Pushes New Tax Extenders Package – Without S-Corp. Increase
From September 23, 2010 Angle
Senate Finance Committee Chairman Max Baucus (D-MT) introduced a new version of his tax extenders package last week. Notably, this most recent package omits the payroll tax increase on architecture and other professional services S corporations previously included in earlier versions of the extenders package.
The previously-proposed revenue-raising measure would subject earnings by professional services S corporations to increased payroll taxes “if 80 percent or more of the gross income of such business is attributable to service of [three] or fewer shareholders.” Although supporters of the provision argue that it would close a loophole that allows some S corporations to avoid paying payroll taxes, the AIA and other professional associations have argued that it would punish small, service-oriented businesses around the nation that follow the rules.
With its omission from Baucus’ extenders package, it appears that the S-corporation provision, in its current form, is dead for the year. However, the AIA is continuing to work with its allies to ensure future provisions targeting S-corporation tax avoidance only affect those who are purposely avoiding payroll taxes while protecting tax-compliant organizations.
Baucus attempted to attach his extenders package to the Senate’s small business bill, but his motion did not receive the unanimous support it needed to be debated.
For more information, contact Christina Finkenhofer, manager of Federal Relations.
For additional resources on the S-Corp. proposal, click here.