WSJ article

[veritas]

Look at third bullet down.

Proposed tax increases include:

• Taxing much of the gains of investment-partnership managers at ordinary-income rates, raising $18.7 billion;

• Clamping down on alleged abuses of foreign tax credits and tightening other rules affecting multinationals, raising $14.4 billion;

• Limiting professionals' ability to use small-business corporations to duck paying employment taxes on their salaries, raising $11.2 billion;

• Increasing an oil-spill tax on petroleum producers to 32 cents a barrel, raising $10.9 billion.

[ChEAr$]

S corporation

Look at third bullet down.

Proposed tax increases include:

• Taxing much of the gains of investment-partnership managers at ordinary-income rates, raising $18.7 billion;

• Clamping down on alleged abuses of foreign tax credits and tightening other rules affecting multinationals, raising $14.4 billion;

• Limiting professionals' ability to use small-business corporations to duck paying employment taxes on their salaries, raising $11.2 billion;

• Increasing an oil-spill tax on petroleum producers to 32 cents a barrel, raising $10.9 billion.

Yep, a summary of the bill was just posted today in our weekly EAlert by the NAEA.

Now they've done it! That House way too mean committee. And i'm mad.

[JoshinNC]

I read the summary & the bill & have determined that my stance on LLC's IS CORRECT!!

At least according to Congress.

http://waysandmeans.house.gov/media/pdf/111/HWC_711_xml.pdf

The bill (Sec. 413(a)(m)(2) on page 284) states that Partners involved in a professional service business will not recieve the same exclusion from SE tax provided under IRC Sec. 1402(a)(13). IRC 1402(a)(13) states that

"there shall be excluded the distributive share of any item of income or loss of a limited partner, as such, other than guaranteed payments described in section 707(c) to that partner for services actually rendered to or on behalf of the partnership to the extent that those payments are established to be in the nature of remuneration for those services".

The exclusion referenced in 1402(a)(13) is an exclusion from SE tax.

So, in Congress' reasoning, my interpretation of the Code that an LLC member who actively participates in the business but does not take GP's has been excluded from SE tax on the distributive income up to this point. If this were not true then why would Congress have specifically now stated in this new Law that they don't get the exclusion?

I can't tell you folks what to do, but IF I were you, and IF you had been making your LLC members pay SE tax on their profits I would be filing amended returns back through 2007 to get that SE tax back, if only as a protective measure.