On September 27, 2017, the Republican led congress in conjunction with the White House released its long-awaited framework (the Framework) outlining the current legislative effort on comprehensive tax reform. Although many significant details have yet to be defined, major provisions such as a lower corporate tax rate for both C corporations and pass-through entities (S corporations, LLC’s and partnerships) will have a significant impact on the cash flow capacity and valuation of these entities.
According to the Framework, the top marginal tax rate for C corps could be reduced significantly from 35% to 20%. The pass-through entity tax rate (S corporations, LLC’s and partnerships) would be reduced to 25%, with some restrictions. Currently, income generated by such entities are taxed at the individual shareholder’s personal tax rate. If voted into law, the Trump Administration’s version of tax reform will likely have a significant impact in the following key areas: [Read more…]