Pass-Through Businesses Seek Break in Tax Bill

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It’s officially the week before Christmas, and Republicans, desperate to get something done before the end of the year, have a final version of a tax plan that they hope to vote on this week.

Pass-through businesses were in the headlines last week as industry representatives fought to get a better deal for these companies, which are organized so that they don’t pay the corporate income tax. Instead, income passes  through to the owner to be taxed under the individual income tax.

Many types of businesses fall under this designation, including, LLCs, sole proprietorship, and what are known as S-corporations. Of the 26 million businesses in 2014, 95 percent were pass-throughs, while only 5 percent were C-corporations. Who does that include? The corner grocery store in your community is probably set up as a pass through, but so are some large high profit companies.

Renaissance Technologies, a hedge fund that manages about $65 billion in assets, is a pass-through. The Trump Organization’s companies are also pass-throughs.

Martin Sullivan, chief economist and contributing editor for Tax Analysts' daily and weekly publications and blog, and an expert on federal tax reform, explains how pass-through businesses function, and who would stand to benefit from the tax bill. 

This segment is hosted by Todd Zwillich