NASE Blogs

Coalition Speaks Out On S Corp Taxation

May 07, 2010

A coalition of small business organizations, including the NASE, has banded together to contest a House proposal that would hike taxes for service sector S corporations.

In a letter to the Committee on Ways and Means, the coalition states, "this proposal would increase taxes on small business owners who are fully complying with the law. It will add to the tax code’s complexity by creating new categories of business activity that will have to be defined and litigated."

The specific details of the bill have not yet been released, however legislation with similar ends has been introduced in the past. That bill would tax capital investments made by businesses engaged in the service sector, including investments in employees, such as training.

The NASE feels that the self-employed and micro-business communities already face an overwhelming regulatory burden in complying with IRS regulations. Not to mention, the proposal could potentially contradict a key policy decision made by Congress in the new healthcare reform law. When Congress adopted the new 3.8 percent tax applied to most forms of investment income, it exempted active S corporation shareholders.

Check back at NASE Advocacy often for updates on this issue.

Read more about the Committee on Ways and Means here.