Comprehensive Tax Reform and Pass-Through Businesses
As predominantly family-owned and -operated businesses, beer distributors are closely-held companies. Comprehensive tax reform is an opportunity to improve tax laws by simplifying the rules and reducing unnecessarily high tax rates. NBWA members are concerned that some tax reform proposals could result in significantly higher taxes on business income.
Under current tax law, companies organized as partnerships, limited liability companies or S corporations are treated as “pass-through entities,” and the tax on business income is paid directly by the owners. Pass-through businesses employ 70 million Americans – more than half of all private sector jobs. Higher taxes for pass-through businesses would adversely impact those jobs.
NBWA opposes any effort to increase the tax burden on pass-through businesses and encourages Congress to pass comprehensive tax reform by reducing similarly the corporate and individual rates applicable to business income. NBWA opposes corporate-only tax reform. NBWA encourages Congress to avoid double-taxation of pass-through entities and to oppose efforts to tax large pass-through entities as C corporations.
Employment and Self-Employment Taxes for S Corporations
More than half of NBWA members are organized as S corporations. Long-standing rules require owners of S corporations to pay the appropriate payroll taxes. NBWA is concerned that some proposals could increase employment and self-employment taxes on owners of closely-held businesses such as S corporations.
NBWA encourages Congress to maintain current employment and self-employment tax rules for owners of closely-held businesses.
Last-In, First-Out (LIFO) Inventory Accounting
More than half of NBWA member companies use the lastin, first-out (LIFO) method of accounting for inventory. Some tax reform proposals include the repeal of this longstanding, widely-accepted method of accounting. This would adversely impact beer distributorships’ cash flow and they would owe significantly more in current taxes.
NBWA encourages Congress to oppose any threats to LIFO inventory accounting.
Many beer distributorships have been serving their local communities for several generations. Beer distributors invest heavily in vehicles, inventory, buildings, land and intangible assets, which is why NBWA and its members support the repeal of the estate tax. Recognizing the country’s fiscal challenges, NBWA supported a compromise measure to extend the 2012 rules: a 35 percent rate and a $5 million exemption, indexed for inflation. While this compromise ultimately was not achieved, NBWA appreciates those members of Congress who supported legislation which made permanent a 40 percent rate and a $5 million exemption, indexed for inflation.
Complete repeal of the estate tax may be difficult right now, but NBWA continues to support efforts to preserve the viability of these businesses that have created jobs and provided economic benefit to communities for decades.
NBWA opposes policies that would make it difficult for businesses to plan for the future including hidden estate and gift tax increases (e.g., proposals related to grantor retained annuity trusts and valuation discounts). NBWA encourages Congress to permanently repeal the estate tax and to maintain meaningful estate planning tools like grantor retained annuity trusts, valuation discounts and reasonable tax rates and exemptions.