CompTIA recently submitted testimony to the Senate Small Business Committee for a roundtable discussion on the effects of tax reform on small businesses. The event featured an open discussion on tax reform by representatives of the small business community. The Senate Finance Committee will ultimately consider the record of this event as part of its tax reform deliberations. CompTIA’s testimony called for tax code simplification; reduction of tax burden on SMB IT firms; growth and innovation incentives; and protection of SMB IT firms from interstate tax compliance burdens.
Two main concerns coming out of the small business roundtable discussion were the cost and complexity of tax compliance and the potential effects of corporate tax reform on small businesses that pay taxes as pass-through entities. CompTIA has continually recognized and advocated on both of these issues. While the tax reform debate has generally been driven by proponents of lowering the corporate tax rate, there is increasing recognition that corporate tax reform alone could disadvantage businesses – typically small businesses – that pay taxes as pass-through entities at individual tax rates.
Earlier this year, the Senate Finance Committee (SFC) initiated weekly tax reform discussions, soliciting ideas from the public to address various aspects of the tax code. From March through June, the SFC held about a dozen hearings on tax topics ranging from simplification to business entities to international competitiveness, all in an effort to construct an outline of how best to reform the current federal income tax system. In June, the SFC continued its discovery by asking senators to submit written statements detailing which tax reform provisions (e.g., credits, deductions) they would support if the reform model started with a clean slate; that is, eliminating all breaks – deductions and credits.
Whether tax reform will happen this year is an unknown. However, many are becoming less optimistic. Clearly, Congress needs to take a hard look at the state of our tax code, including the cost in both tax dollars and compliance expenses, especially for small businesses.
