House passes permanent tax relief for S Corporations
On the 12th of June, the House of Representatives passed a bill to give permanent tax relief to S Corporations for certain built-in gains.
The bill, sponsored by Rep. David Reichert (Washington State, District 8 which includes Bellevue and Mercer Island) and co-sponsored by Reps. Ron Kind (Wisconsin, District 3 which includes La Crosse and Eau Claire) and Tom Reed (New York, District 23 which includes Jamestown and Ithaca) is cited in it’s short title as “S Corporation Permanent Tax Relief Act of 2014”.
The bill will reduce the “recognized period” for built-in gains by an S Corporation from 10 years to 5 years, and it will be permanent as it will change the actual wording under title 26 section 1374 (d) of the United States Code (US Code).
Currently, 26 USC 1374 states that any net built-in gains acquired during the first 10 years of being an S Corporation will be taxed as taxable income and at the highest rate possible. There were Special rules applied during the tax years of 2009-2010 that reduced this time down to 7 years, and for the tax years 2011-2013 down to 5 years. This bill will reduce the number of years from 10 down to 5, but will be permanent.
The roll call vote showed that the Yeas-Nays were 263-155 with 13 not voting.