TAX NEWS - June 2010

U.S. Tax: Baucus: Extenders S corp. tax needs work

Senate Finance Chairman Max Baucus (D-Mont.) on Thursday said legitimate concerns have been raised by lawmakers over the S corporation tax increase included in the so-called tax extenders bill and that those issues are being addressed.

"We're working on it," he said, adding, "It needs some work."

Baucus did not provide any details on changes to the provision. He did, however, say the measure's overall intent is to prevent tax abuse.

"The whole purpose of the bill is to prevent abuse that occurs among some professional sub S corporations where management gives itself very small salaries and pays itself large dividends to avoid payroll taxes."

Opponents contend the language in the Senate bill is ill-defined and goes too far in trying to curb that abuse.

"I think the tax extenders package is to provide offsets, and at the liability to those companies," said Sen. Mike Enzi (R-Wyo.), adding the tax as it is currently written will "affect their ability to reinvest in new jobs."

The Senate is expected to complete work on the extender package next week, at which point it will turn its attention to legislation granting additional tax relief and expanding loan opportunities to small businesses.

"The only thing hold it up, franking, is the extender bill," Baucus said. "When that's out of the way we're going to jump into that [small business] package because it's so important."