Hearing on Small Business Tax Reform

May 15, 2013

pic-uscapitol-flagOn May 15, 2013, the House Ways and Means Subcommittee on Select Revenue Measures is holding a hearing on the small business and pass-through entity tax reform discussion draft that was released by the committee on March 12.

The Ways and Means Committee released the discussion draft as a way to solicit feedback on the details of the draft proposals which the committee plans to include as part of their comprehensive tax reform legislation. The aim for such reform is to broaden the tax base, lower tax rates and simplify the code for individuals as well as small businesses.

Subcommittee Chairman Pat Tiberi (R-Ohio) has said the subcommittee is interested in comments and analysis relating to the basic architecture of the draft proposals. Specifically, they are looking for input on the implications of the changes to the cash accounting rules, the questions that must be answered in designing a workable unified pass-through regime, and the real-world ramifications of the incremental proposals to modify the rules governing S corporations and partnerships.

The discussion draft is the latest in a series of drafts put forth by the Ways and Means Committee as a result of hearings, stakeholder meetings and working group discussions over the past year. Among a host of proposals, the draft includes:

  • Permanence for Section 179 expensing at threshold of $250,000, which is set to drop to just $25,000 in 2014;
  • Simplification and an increase in the threshold for small-businesses utilizing cash accounting from $5 million to $10 million for all businesses;
  • An increase and expansion in the deductibility of start-up expenses from $5,000 up to $10,000 and include operational costs;
  • A reordering and simplification of the due dates of tax returns for partners and S corporations; and
  • Two separate options designed to achieve greater uniformity between S corporations and partnerships.

The Committee released this draft because it hopes to achieve simpler, more uniform tax treatment for small businesses and pass-through entities, and in the interests of transparency, received feedback from a broad range of stakeholders, taxpayers, practitioners, economists, and members of the general public on how to refine these proposals.  Ways and Means Committee Chairman Dave Camp (R-Mich.) asked Chairman Tiberi to schedule this hearing to gather analysis from outside experts on the details of the discussion draft.

For more details on the discussion draft, please click the link here.