Passthrough TaxationProposals for tax reform raise a number of significant questions for the future and operation of passthrough entities such as limited partnerships, LLCs treated as partnerships, and S Corporations. April 24, 2017
Both President Trump’s proposals and the Blueprint offer that the “business income” of passthrough entities would be subject to a lower rate of tax, which would be the same as or close to the proposed corporate tax rate. The Blueprint proposes a cap on the tax on business income of a passthrough entity at 25 percent. President Trump has proposed allowing passthroughs to elect being taxed either at the proposed 15 percent corporate rate or at the tax rates applicable to individual taxpayers.
How these proposals are intended to interact with the general business entity tax reform is not clear.