Tax Cuts for S-Corporations (H.R. 4453)

What is H.R. 4453?

(Updated January 31, 2017)

This bill would permanently cut in half (from 10 years to 5 years), the length of time that S corporations have to pay the built-in gains tax, commonly referred to as the "BIG tax." S corporations, according to the IRS, "are corporations that elect to pass corporate income, losses, deductions, and credits through to their shareholders for federal tax purposes." They generally don't pay corporate taxes and are limited to 100 shareholders. C corporations, on the other hand, are taxed separately from, and in addition to, their shareholders. When an S turns into a C, or acquires assets from a C, they have to pay the BIG tax. 

The same reductions would also be applied to regulated investment companies and real estate investment funds. 

Argument in favor

Would free up S corporations' access to capital, which in turn might help spur economic growth.

Argument opposed

Increases the federal deficit by a billion and a half over the next decade.

Impact

The bill affects the roughly 4.5 million S corporations operating in the United States.

Cost of H.R. 4453

The staff of the Joint Committee on Taxation (JCT) estimates that enacting H.R. 4453 would reduce revenues, thus increasing federal deficits, by $1.5 billion over the 2014-2024 period.

Additional Info