The Obama administration is considering a plan to force more businesses to pay the corporate income tax, an industry group said, in an overhaul package that could be unveiled as early as this month. Under the proposal, entities with more than $50 million in gross receipts would pay the corporate income tax, instead of the individual income tax they now pay.
Partnerships like law firms and hedge firms would likely be the most affected. "Treasury Department staff are working on a tax reform proposal that reportedly would include corporate taxation of any pass-through entity with gross receipts of $50 million or more," said a letter to members of the National Association of Publicly Traded Partnerships from its executive director Mary Lyman sent on Friday, obtained by Reuters.
Pass-through entities are those in which the income and tax liability "passes through" to the individual rather than being taxed at the company level. The top corporate tax rate is now the same as the top individual tax rate - 35 percent. Still, many firms such as private equity and hedge funds have certain income taxed at lower capital gains rates.
Lyman's group represents publicly traded partnerships investing mostly in energy companies. Such partnerships, also called Master Limited Partnerships, pay no tax themselves. Instead the tax is paid by individual owners.
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