Overview
Law360 quoted Aaron Nocjar in a November 3 article titled “Tax Bill’s Pass-Through Protections Unlikely to Avert Gaming.” The article explains why the House Republicans’ legislation to lower tax rates for pass-through businesses and corporations alike adds complex provisions to the tax code that could be exploited despite the guardrails proposed in the bill.
Mr. Nocjar tells Law360 that if a business has abundant capital in the first year and makes this option so that more than 30 percent of income will be taxed at the pass-through rate, and then capital declines over the next couple of years, the business takes the risk that its income will be taxed based on facts and circumstances and it may not be able to keep taking advantage of the more favorable 70-30 percent split.
“You can’t game the system that way by picking and choosing, and going in and out of that position over a five-year period. That’s why I see this as a guardrail for gaming the system. You can’t go in and out quickly, depending on what you think might be your capital percentage year-to-year,” Mr. Nocjar says.
The full article can be read at Law360 (subscription required).
