Legislative update - Partnership, S corporation proposals in Ways and Means chairman's tax reform “discussion draft”  

February 28: The tax reform “discussion draft,” released this week by House Ways and Means Chairman Dave Camp, proposes changes to the income tax rate structure, the employment tax rules applicable to passthrough entities, the Subchapter K and Subchapter S rules, the publicly traded partnership (PTP) rules, and other provisions relevant to passthrough entities.

If enacted, these provisions would significantly change the taxation of partnerships and S corporations, and would affect choice-of-entity decisions.


A KPMG report provides initial observations regarding the potential impact of the proposed changes.


  • First, the report explains how some of the proposed income tax rate changes could affect choice-of-entity decisions.
  • Then, this report addresses the impact of proposed changes to the employment tax rules applicable to partnerships and S corporations.
  • Next, it highlights how proposed changes to the Subchapter K rules (including the addition of a carried interest provision) and the Subchapter S rules could affect partnerships and S corporations.
  • Finally, the report comments on proposed changes to the PTP rules and certain other provisions that may be of interest to passthrough entities.

This KPMG report does not address proposed changes in the treatment of real estate investment trusts (REITs) or regulated investment companies (RICs).


Instead, it focuses only on passthrough entities that are treated as partnerships or S corporations for federal income tax purposes.


Read the February 2014 report [PDF 352 KB] prepared by KPMG LLP.


For more information, contact a tax professional with the Passthroughs group of KPMG’s Washington National Tax:


Carol Kulish

(202) 533-5928


Jim Sowell

(202) 533-5710




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