Washington (June 23, 2003) -- Representatives of the American Institute of CPAs crossed swords with Bush Administration officials during last week’s congressional hearings on legislation to make Subchapter S corporations more attractive to small businesses.

Testifying on behalf of AICPA’s Tax Executive Committee, PwC Partner Robert A. Zarzar urged the House Ways and Means Subcommittee on Select Revenue Measures to take action to “recognize and remove the anti-competitive limitations on the growth of existing S corporations.”

Both Zarzar, and Ernst & Young’s Laura M. MacDonough, who represented the Institute’s S Corporation Taxation Technical Resource Panel, endorsed a series of tax code reforms contained in several pending bills designed to remove barriers to the formation of S Corps.

Among other things, those bills would double the number of permissible shareholders in an S Corporation from 75 to 150 - a change that the AICPA representatives characterized as “good public policy.”

Those same provisions, however, received a drubbing from Bush Administration witnesses, including Deputy Assistant Secretary Greg Jenner.

“Treasury cannot support such a dramatic increase, which we believe would run counter to the goal of maintaining Subchapter S as the simplest of systems for businesses with more than one owner,” Jenner told the subcommittee. “Increasing the number of shareholders will, inevitably, bring increased pressure to liberalize other facets of Subchapter S which will, in turn, increase the complexity of the provisions.”

-- Ken Rankin

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