Sponsor
Angela Craig
Representative · D-MN
Representative · D-MN
The bill reduces taxes for many small C corporations and increases clarity and fairness in partnership and carried-interest taxation while expanding SALT relief and taxing buybacks — but it creates new revenue losses, compliance burdens, cash‑flow risks for partners, and potential economic distortions that shift costs or complexity onto other taxpayers and businesses.
Small C corporation owners with taxable income at or below $400,000 will pay an 18% federal corporate tax rate (down from 21%), reducing their federal tax bills immediately for taxable years ending after enactment.
Partnerships, service providers, and the IRS get clearer, more specified rules for valuing and recognizing income on service-for-partnership-interest and carried-interest transactions, reducing disputes, audit uncertainty, and legal ambiguity.
Partners who provide investment management services and similar service-linked interests lose preferential capital-gain treatment, increasing ordinary-income reporting and limiting tax-avoidance via family/related-person partnership structures (greater tax fairness).
Taxpayers broadly face increased federal deficits or shifted tax burdens because the small-corporation rate cut and the expanded SALT deduction reduce federal revenue.
Corporations, partnerships, taxpayers, and the IRS will face substantial new compliance, reporting, valuation, and administrative burdens from the graduated corporate structure and multiple new partnership rules, raising costs and IRS workload.
Service-providing partners, fund managers, and certain taxpayers will often face higher tax bills because carried-interest and service-linked partnership gains are recharacterized as ordinary income, increasing income and payroll tax liabilities.
Based on analysis of 7 sections of legislative text.
Creates a small‑corp two‑tier rate, changes taxation of partnership interests (including investment manager allocations), adjusts a SALT deduction rule for some self‑employed, and raises the buyback excise tax.
Introduced May 8, 2025 by Angela Craig · Last progress May 8, 2025
Creates several tax changes: it gives small C corporations a two‑tier rate with a lower 18% rate on the first $400,000 of taxable income (for corporations with taxable income ≤ $5 million), rewrites rules that govern partnership interests paid for services (including a deemed income election unless the recipient opts out), adds special rules that recharacterize certain partnership capital gains tied to investment management services as ordinary income, changes a deduction fraction for certain state and local taxes for lower‑income self‑employed taxpayers, and raises the excise tax on corporate stock repurchases from 1% to 1.5%. Together these changes affect small C corporations, partners and investment managers who receive partnership interests for services, self‑employed taxpayers with AGI under $400,000, and public corporations that repurchase stock — and they introduce new compliance and reporting requirements for partnerships and affected taxpayers.