Commercial Integrator June 2021 - 24

BUSINESS Laws & Regulations
LEGISLATION FOR
INTEGRATORS
TO KEEP AN EYE ON
While there is little legislation that deals with integration
directly, plenty of new laws and regulations can have
significant impact on how integrators do business.
By Jonathan Blackwood
POLITICS ARE EVERYWHERE. It's difficult
to log onto a website or turn on the
television without hearing about politics
as if it's a sport or television series. As a
result, it's easy to forget that beneath the
rhetoric most highlighted, real laws are
being passed that have real benefits and,
sometimes, consequences.
With that in mind, let's take a look at
legislation being discussed for the coming
years that may affect integrators in ways
they don't realize.
Taxes
" We've had all the goodies in the Christmas
stocking that we got in the latest COVID
relief bill, but now comes the coal in the
stocking to pay for it, " says Dean Zerbe,
national managing director of Alliantgroup.
" Washington is spending a lot of time
thinking and focusing on taxes, particularly
tax increases that they may be levying on
businesses and business owners. "
Lawmakers will do this through reconciliation,
meaning they can get this done with
fifty votes. It will limit how much increase
is possible, but Zerbe believes they have a
path to move forward with tax increases.
" I would expect that the corporate tax
rate will go from 21% up to 26%, 27%, or
maybe even 28%, " says Zerbe. " Then on
the ordinary income rates which would
really affect the passthroughs, escrows,
LLCs, and partnerships that people may be
organized in, you could see those rates go
24
Commercial Integrator JUNE 2021
from 37% up to 39.6%. "
Democrats are feeling comfortable
enough with the state of the economy that
the initial timeline for tax increases many
expected will be much quicker than first
thought. " We'll see, and we'll see about
the timing of it, " says Zerbe.
Zerbe also encourages integrators to
keep an eye on capital gains taxes. " There's
a strong interest from the democrats to
raise capital gains from 23.8% to 39.6%.
That might be more for folks with significant
capital gains. "
199A of the Internal Revenue Code is also
of great interest to integrators, which, according
to the IRS website, " provides many
owners of sole proprietorships, partnerships,
S corporations and some trusts and estates,
a deduction of income from a qualified trade
or business. " Zerbe doesn't believe this is a
first order of business for democrats, but he
does believe they'll take a look at 199A.
" Estate tax is another area that I think
they'll at least make a run at, " says Zerbe.
" I don't think they're going to go that far.
You've got a number of Democrats that
are keen on keeping in place the estate
tax as it is.
" I don't see that being as robust a
change as you may be hearing in the newspapers, "
he says.
As for timing, Zerbe expects conversations
to carry into the fall before changes
are made.
" The more you're looking at it being a fall
activity, the more I would think the natural
course would be to do it effective date
of enactment or, more likely, the new tax
year, " says Zerbe. " January 1 would be the
logical starting point for that. "
Zerbe also doesn't expect any of these
increases would be put in place retroactively,
and that there is more chatter about
having increases count only going forward.
When it comes to wealth tax, Zerbe
doesn't believe that Democrats will have
the majority necessary for the votes needed.
It's a cumbersome revision to enact
something along those lines.
" They have been looking at thumping
high wage earners at businesses, particularly
corporations. The most recent bill
didn't get a lot of attention, but they did
a significant change on 162(m), which is
the allowance for deducting high wage
earner income for corporations, " says
Zerbe. " I could see them digging into that
area a lot more.
" A lot of clouds on the horizon in terms of
tax. We'll see what they pass but I certainly
think that it's real that they'll be making a
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Commercial Integrator June 2021

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