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Pass-through tax regulations painstakingly working toward finality

On Behalf of | Jul 19, 2018 | Business Formation & Planning |

Famed 19th century German/Prussian ruler and aristocrat Otto von Bismarck is the alleged author of the remark (paraphrased) that, “Laws are like sausages; it’s better not to see them being made.”

Capitol Hill legislators and bureaucrats know all about that, with the enactment of a fully realized law often entailing a preceding and messy exercise marked by tedium and seemingly endless rounds of revisions.

Take the so-called federal Tax Cuts and Job Act passed by Congress last year. A key element of that seminal and massive overhauling of prior legislation focuses on a mouth-watering 20% pass-through tax deduction on earned income by high number of businesses in Connecticut and nationally. We highlighted the essential details of the deduction in a June 4 blog post.

Unfortunately (and here comes that sausage reference) persistent tinkering on the specifics continues to occur even long after the law’s effective date was triggered. The bottom – and frustrating – bottom line for many businesses is that they are still not quite sure whether they are eligible to take the deduction. In fact, a recent Bloomberg piece on the subject matter stresses that, “Hundreds of thousands of U.S. employers still don’t know if they qualify.”

They will likely wait for an appreciable amount of additional time before knowing with certainty. Reportedly, multiple entities with drafting and oversight duties regarding clarification are at loggerheads concerning carved-in-stone final guidance that they can dependably rely upon to make critically important business decisions.

The latest word on regulatory finality posits that the U.S. Treasury Department could pass along promised clarifications to the White House Office of Management and Budget as required by the end of July. The OMB has additional time thereafter to review the specifics.

In the meantime, it remains a waiting game for business principals across the country.