As we reported last week, President Trump reached a deal with Democrats to raise the debt limit and fund the government for three months. An agreement was reached in part due the critical need for relief aid in the area impacted by Hurricane Harvey.

Congress has now turned to continuing the appropriations process and tax reform. Legislative staff for the White House have said that Congress and the administration are “pretty close to finalizing” a bill and have addressed many points of disagreement, but details have not been released.

One major question for tax reform is how to address the issue of pass-through entities when lowering the corporate tax rate. Pass-through entities like S corporations and partnerships don’t pay corporate taxes, but rather pass their earnings to their owners who pay taxes at the individual level. A significantly lower corporate rate could spell political trouble. Tax professionals also argue that it would be problematic to create a special tax system that is separate from individual tax rates, as it may incentivize taxpayers to misclassify income.

This week Treasury Secretary Steven Mnuchin said President Trump wants to lower both the corporate and pass-through rate, but that service companies who are pass-throughs may not get the benefit of the rate.

On Wednesday House Ways and Means Chairman Kevin Brady (R-TX) released a timeline for the reform process. More details on the plan will be released on September 25 with the goal of taking up legislation toward the end of October. The completion of a budget resolution is also critical step in order to use the procedural tool in the Senate to pass the legislation using a simple majority.

Chairman Brady told BNA last week, “My goal—and we are still in these discussions—is to, from a percentage standpoint, lower taxes equally whether you are a pass-through or structured as a corporation.”

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