Monte Jackel Quoted in Tax Notes Today on Trump Tax Plan’s Effect on Passthrough Entities

Monte Jackel, senior counsel in the tax practice at Akin Gump, has been quoted in the Tax Notes Today article “Passthrough Gaming Poses Hard Questions for Trump Tax Plan,” regarding the controversy over how lawmakers in Washington might prevent anyone from taking advantage of the tax system for passthrough entities if the Trump administration’s new tax plan were to be implemented.

As the article reports, the White House has proposed a 15 percent business tax rate that would be available to small and medium-sized businesses. Implementing this, Jackel said, could prove challenging to the IRS when it comes to partnerships and S corporations. Passthrough gaming, he said, is “very common for S corporations where the game is to minimize self-employment tax by paying less salary and having more distributive share.”

One option for the Trump administration, Jackel said, would be to establish rules excluding some types of businesses from claiming the 15 percent tax rate. He warned, however, that such an approach, “could cause a business entity to fall in or out of the lower business tax rate as its assets or income fluctuate from one year to the next.”

Finally, Jackel pointed out that several other issues need to be resolved if the new tax plan is implemented. This includes whether lease or license income would be considered business or investment income and whether to allow partners to be treated as employees.