Webinar Transcript (6/5/2024): “Understanding Pass-Through Entity Taxation”

Jonathan Shenkman

June 05, 2025

Webinar Transcript (6/5/2024): “Understanding Pass-Through Entity Taxation”

Host: Jonathan I. Shenkman, President & Chief Investment Officer of ParkBridge Wealth Management (Contact: jonathan@parkbridgewealth.com)

Presenters: Angelika J. Herburger, CPA Senior Tax Manager, CBIZ Advisors LLC (angelika.paskins@cbiz.com), and Russell S. Ephraim, Managing Director, CBIZ Advisors, LLC (Contact: russell.ephraim@cbiz.com)

00:00:18.570 --> 00:00:42.600

Jonathan Shenkman: Good morning, and welcome to the Parkbridge Wealth Management Spring Webinar Series. This program is entitled Understanding Pass-through Entity Taxation. As always. My name is Jonathan Schenkman. I'm the president and chief investment officer of Park Bridge. Wealth management. In that role I serve in a fiduciary capacity to help my clients achieve their financial objectives. The goal of my programs is to bring professionals together to help them better serve their clients.

00:00:42.600 --> 00:00:52.699

Jonathan Shenkman: This is done by educating attendees on the latest topics in wealth, planning, and by encouraging collaboration between a client's attorney, Cpa. And financial advisor, where appropriate

00:00:52.700 --> 00:01:09.219

Jonathan Shenkman: my practice focus on working with high net worth families, businesses and not-for-profits, I manage individual investment portfolios, trust accounts, corporate retirement plans, and endowments to help my clients achieve their financial goals. In addition to the 20 or so events that I run every year. I also do a fair amount of writing

00:01:09.430 --> 00:01:37.939

Jonathan Shenkman: on the topics of investing and financial planning, and you created my work in a variety of periodicals, including Barron, Cnbc. Forbes, Kiplinger, the Wall Street Journal and Trust and Estates Magazine to name just a few. You can see all my work on my website at parkbridgewealth.com forward slash articles, or by following me on social media at Jonathan, on money. Additionally, you can check out my weekly, podcast which is also called Jonathan on money. And you can listen to that in Apple spotify or wherever you get your podcast

00:01:38.020 --> 00:01:58.099

Jonathan Shenkman: today, we're privileged to hear from Angelica Herberger and Russell effrine both from seabis advisors based in New York City by way of background. Angelica is a senior tax manager in the private client services group, specializing in partnership individual and trust taxation. With over 10 years of experience she brings a wealth of knowledge and expertise to her role.

00:01:58.100 --> 00:02:11.300

Jonathan Shenkman: Her comprehensive understanding of partnership taxation, coupled with her expertise in multi-state tax returns and working with family groups, allows her to deliver tailored strategies and solutions that address the unique needs of her clients.

00:02:11.420 --> 00:02:19.309

Jonathan Shenkman: Russell is a managing director who has been serving clients since 2,007. He's a national expert in family business and individual tax.

00:02:19.390 --> 00:02:44.979

Jonathan Shenkman: He has in-depth knowledge and experience related to federal and multi-state preparation of investment and operating partnerships, trusts and estates and foundations. Russell specialized in advising high net worth families with complex tax situations, such as farm reporting, compliance and international income reporting. In addition, he frequently works with family office groups to service all aspects of income, tax planning, and advisory services on a comprehensive scale.

00:02:44.980 --> 00:02:54.409

Jonathan Shenkman: Today Angelica and Russell will be speaking about understanding pass-through entity taxation. And with that introduction. I'll now turn the program over to Angelica and Russell.

00:02:55.370 --> 00:03:22.199

Angelika J. Herburger: Thanks, Jonathan. Good morning. Everyone. As Jonathan mentioned. We'll be talking about the State pastor entity taxation today, and this is a timely topic. There's a lot of talk in the tax world right now about the State and local tax deduction cap and the potential changes to the Pt deduction. So this is really a great time to refresh on what the Ptet is, why it was implemented, and the considerations that need to be made before electing in for your business.

00:03:22.240 --> 00:03:52.179

Angelika J. Herburger: So let's just go right into it. The purpose of the pass-through entity tax. So the Pte taxes were designed to mitigate the impact of the Federal limitations on the State and Local tax assault deduction. So in 2017, the Tax Cuts and Jobs Act, the Tcja Limited that deduction at the individual level to $10,000. So these taxes are a way to offer a workaround and minimize this burden on the pass-through entities and their owners.

00:03:53.430 --> 00:04:04.190

Angelika J. Herburger: So prior to 2018 individuals could deduct their real estate taxes and state income taxes that they paid during the year on their individual tax returns.

00:04:04.190 --> 00:04:28.490

Angelika J. Herburger: So when this was limited to $10,000. The State Government agencies wanted to offer a way for the taxpayers, especially in the high income tax states like New York, New Jersey, Connecticut, where taxpayers are paying high real estate taxes and income taxes. And it's a big tax benefit for those taxpayers. They wanted to offer a way to work around this $10,000 limitation.

00:04:28.490 --> 00:04:29.820

Angelika J. Herburger: the individual level.

00:04:29.910 --> 00:04:57.520

Angelika J. Herburger: So the past due entity tax offers a deduction at the entity level to kind of get around that $10,000 cap, and then that flows through to the owners on their individual tax, returns the Us. Department of Treasury and the Irs blessed this workaround with notice 2020 to 75. So they said it was okay to take these pte deductions, even though it was a workaround to this $10,000. Cap.

00:04:57.700 --> 00:05:12.880

Angelika J. Herburger: So in summary, the way it works is an entity will pay the State income tax to the government agencies at the entity level. The entity gets a deduction for those taxes paid, so it lowers the income at the entity level.

00:05:12.880 --> 00:05:31.609

Angelika J. Herburger: That lower income will flow through to the owners, so they get the benefit of that deduction without the $10,000 limitation, and the owner will also get a credit that flows through the entity for their individual state tax returns that will offset their state income tax liability.

00:05:32.022 --> 00:05:41.400

Angelika J. Herburger: So it's the best of both worlds. They're getting the deduction at the entity level, and then they're also getting the credit at the individual level to offset their liability.

00:05:43.120 --> 00:05:59.910

Angelika J. Herburger: So in looking at the Ptet and analyzing whether or not it makes sense for an entity. You really need to look at it on a state by state basis. Each State has its own set of rules and regulations surrounding the Pt. So some examples of what might differ for each State

00:05:59.910 --> 00:06:25.090

Angelika J. Herburger: election due dates. So, for example, New York, if you want to elect into the New York. Pt. The election needs to be made by March 15th of the year. You want to make the election. So if in 2024, you wanted to make the New York Ptad election. That election needed to be made by March 15th of 2024, and that's pretty early in the year for entities to make that decision about whether or not they want to elect into the Ptet.

00:06:25.280 --> 00:06:42.760

Angelika J. Herburger: This is unlike other States where the election is made with the tax return in the following year. So it's important to be mindful of when the due dates are for each tax jurisdiction, because if you miss, if you miss the election, you might miss out on that deduction. So the election due dates are important.

00:06:42.970 --> 00:06:50.829

Angelika J. Herburger: The income base to calculate the tax also differs State by State. So some States will take into account

00:06:51.040 --> 00:07:19.730

Angelika J. Herburger: residents and non-residents at different apportionments. So, for example, for a New York Pt. The resident partners that live in New York, they will be including 100% of their income in the calculation of the Pt. Income tax base, where, if you have nonresident partners, let's say, in New Jersey and Connecticut, they will only be apportioned at whatever the entity apportions their income at for those States. So if you have a New York law firm, and

00:07:19.730 --> 00:07:43.419

Angelika J. Herburger: only 20% of that income is allocated to New York. The New York partners will include 100% of their income in the Ptap base, while the New Jersey or Connecticut partners will only include 20% of their income in the Ptap base. This is different than some other States like Illinois. That apportion everybody at whatever the entity apportionment rate is. So you can't just use one template

00:07:43.480 --> 00:07:55.789

Angelika J. Herburger: to analyze the tax for each state, because it really is specific to what's included in the tax base for each state. So it's important to be mindful of that when when you're analyzing whether or not this makes sense to elect in.

00:07:56.370 --> 00:08:16.409

Angelika J. Herburger: and the credit at the individual level is also going to differ state by state. So a State like New York has a refundable credit. So if the entity is paying at a higher tax rate than what the individuals will be paying at their level, they can file for a refund when they file their individual tax return.

00:08:16.830 --> 00:08:33.880

Angelika J. Herburger: This is different than a state like California, where it's a non-refundable credit. So if the entity pays a higher tax than what the individual owes. They can't file for a refund at the individual level. It will have to carry over for the 5 year period that they allow the carryover.

00:08:34.140 --> 00:09:00.049

Angelika J. Herburger: And then there are some states like Georgia that don't flow through a credit, but rather they just exclude that income from the individual's tax return. So that's not a credit that's flowing through, but rather just an exclusion of that income. So these are just some of the examples of what differ State by State, but it really has to be analyzed on a State by state basis when determining what you want to elect into at the entity level.

00:09:02.090 --> 00:09:18.970

Angelika J. Herburger: So the Aicpa, the American Institute of Certified Public accountants. They have a great chart on their website, and we've included the link. So if you receive the slides, you can access it there. But this is basically just a snapshot of what the Pt. Looks like on a state by state basis.

00:09:18.970 --> 00:09:33.230

Angelika J. Herburger: So, as you can see here, about 36 States and one locality have enacted a Pt. So there are many opportunities for Pt. Elections in various States. It also indicates which ptets are set to expire at the end of 2025.

00:09:33.590 --> 00:09:57.290

Angelika J. Herburger: It talks about the Pennsylvania and Maine proposed Pts. In those States that haven't passed yet, and then there are some states where there is no Pt. And there's nothing in the works for Pt. For those States. So if you're looking to analyze the Pt. For your business, this is a great snapshot to get a starting point of where you might have the opportunity to elect in.

00:09:59.210 --> 00:10:17.020

Angelika J. Herburger: And this is just a continuation of that chart, and it lists out each State and the effective year of the Ptap for those States with a little blurb on the side of when they might be set to expire. So this is a great resource, and it definitely helps in in determining where you might want to elect in for your business.

00:10:20.550 --> 00:10:42.479

Angelika J. Herburger: so you might think well, if you get the deduction at the entity level, and you still get a credit at the individual level. Why wouldn't you elect in for every State for every entity? What would be the reason not to elect in? And although it usually is very beneficial to elect into a Pt. There are definitely some considerations that need to be made before making that election.

00:10:42.870 --> 00:10:50.790

Angelika J. Herburger: and one of those reasons is the residency of the entity's partners, and whether those States allow a resident credit for Pt.

00:10:50.990 --> 00:11:13.290

Angelika J. Herburger: So for those of you that aren't familiar with a resident credit. When you file an individual tax, return your resident state, you report 100% of your income, and then you may have non-resident states where you apportion some of your income as well. So let's say you have a New York resident. That also has income source to New Jersey and Connecticut.

00:11:13.720 --> 00:11:32.149

Angelika J. Herburger: The New York return will generally provide a credit for whatever taxes were paid to New Jersey and Connecticut on that same income. It's a way to avoid double taxation of paying on your non-resident States, and then paying tax again on your resident state on that same income.

00:11:32.280 --> 00:11:50.710

Angelika J. Herburger: So the issue is for some States like Pennsylvania that don't have a similar tax to the Pt. They don't allow a resident credit for ptet taxes. So, electing into those nonresident States could be detrimental to those Pennsylvania partners from a tax perspective.

00:11:51.054 --> 00:12:04.820

Angelika J. Herburger: We recently worked with one of our clients, a large Pennsylvania-based law firm that had never elected into the Ptet for that reason and some others, but but it never made sense for them to elect into these nonresident States.

00:12:04.990 --> 00:12:22.199

Angelika J. Herburger: But they recently grew their New York practice, and many of their New York partners were pushing to to make the election, because it was very beneficial for them. So we had to provide an analysis of the cost to the Pennsylvania Partners versus the benefit to

00:12:22.200 --> 00:12:43.009

Angelika J. Herburger: the New York partners, and ultimately they did decide to make the election for the New York return. But it's really important to do these types of analysis, and for the owners to have those discussions before making an election like this, because it will affect each partner differently, and they have to be aware of how this is going to affect their income and their individual tax returns.

00:12:43.560 --> 00:13:04.659

Angelika J. Herburger: The administrative burden for internal accounting also needs to be considered. This tax is a different animal than what we've seen in the past. You know, we've had our withholding and composite taxes which were strictly flow through to the partners. It was paid on their behalf. It was a balance sheet item, no deduction at the entity level.

00:13:04.660 --> 00:13:17.250

Angelika J. Herburger: and then we had our entity level taxes, which were deductible by the entity, but generally strictly for the entity. Nothing from those taxes flew through to the owners of the entity.

00:13:17.320 --> 00:13:46.139

Angelika J. Herburger: The Pt. Wears both hats. It's a deduction at the entity level, but it's also a flow through to the individuals that they get credit for on their individual tax returns. So the accounting can get complicated, especially when you have equity versus non equity partners. How do you reduce the guaranteed payments to make sure that they get the benefit of that deduction. But you still have a mechanism to account for withholding those Pt. Taxes that were paid on their behalf.

00:13:46.140 --> 00:14:02.780

Angelika J. Herburger: So that gets really complicated. And it's definitely something that needs to be taken into consideration before electing in projections can get really complicated. Because when you're looking at estimates, you really need to have a good format for coming up with what that looks like.

00:14:03.180 --> 00:14:20.500

Angelika J. Herburger: and items like overpayments in the following year. How do you account for that? If people left the firm, what are you going to do to get that accounted for and allocated to the partners correctly. So there's a lot that goes into the accounting for the Pta taxes.

00:14:21.070 --> 00:14:40.380

Angelika J. Herburger: And does the operating agreement include language regarding the Pt. It's relatively a new tax. So a lot of the time there aren't. There isn't language in the agreement for how the Pt. Should be allocated or treated, and, as I mentioned before. This is kind of a different type of tax than we've seen in the past. So

00:14:40.380 --> 00:14:51.579

Angelika J. Herburger: if there's nothing pointing to how you should allocate in the agreement decisions need to be made, you know, at the owner level of how they want to handle that for their firm. So it's it's something that needs to be considered

00:14:52.050 --> 00:15:17.939

Angelika J. Herburger: additional costs for tax return planning and compliance. A lot of the Pts require a separate return. So that's going to be additional accounting fees for preparing those tax returns as well as the planning aspect when you know when those projections are happening and the accountings internally need to be worked out. That's something that you're depending on the accountants to help with, and and there are compliance costs that go along with that

00:15:18.580 --> 00:15:23.679

Angelika J. Herburger: cash flow and larger estimated tax payments required at the entity level

00:15:23.870 --> 00:15:35.370

Angelika J. Herburger: prior to electing into the Pt. The individuals were paying these state taxes at their level. The entity wasn't fronting the cash for that. So once the entity elects into the Pt.

00:15:35.400 --> 00:15:55.880

Angelika J. Herburger: Now the entity is fronting that cash ahead of time, and then generally withholding from the partners later. But they still have to have the cash flow to be able to make those payments upfront, especially for the estimated tax payment. Due dates that are quarterly a lot of times throughout the year. So that's going to be a big factor in determining whether or not an entity want to elect in

00:15:56.240 --> 00:16:13.529

Angelika J. Herburger: tax rates may be higher at the entity level than they are at the individual level, and we'll see in the example that we'll talk about in a little bit. But a lot of the times. The entity is going to pay a higher rate of tax, because when you group everybody's income together, it may bump

00:16:13.530 --> 00:16:41.360

Angelika J. Herburger: that income into a higher bracket. So it's paid at a higher tax rate at the entity level, and then the individuals will have to file for the refund at the individual level. If their tax rate is lower, this might not be something that the partners want to do. They're paying extra cash upfront, and then they have to wait to file their tax return and they get the refund from those State jurisdictions later. So that's definitely a consideration that needs to be made before electing in.

00:16:41.990 --> 00:16:52.180

Angelika J. Herburger: and there may be additional filing requirements at the individual level for non-resident States. So if there was a composite tax that was elected into previously. But now

00:16:52.180 --> 00:17:12.769

Angelika J. Herburger: the entities making a Pt. Election well, those partners weren't required to file in those non-resident States in the past. But now that you have the Pt. Election in place. There may be a filing requirement. So that's additional returns that the individuals have to file and additional possible accounting fees that need to be paid at the individual level if they are.

00:17:12.770 --> 00:17:21.669

Angelika J. Herburger: if they're elected into those States. So, Russ, you had a good example of an entity that decided not to elect in right. You want to talk about that.

00:17:21.670 --> 00:17:34.440

Russell Ephraim: Right? So I have a a client is a New York law firm. And they had cash flow issues. So their cash doesn't come in evenly throughout the year. It's unpredictable, so

00:17:34.780 --> 00:17:48.560

Russell Ephraim: they don't know if they're going to have the cash to collect either from their partners or have cash on hand to make the payments. So what they'd have to do is revise. The partners draws, which, when they're normal, when they're used to getting a certain amount of draw every month.

00:17:48.610 --> 00:18:10.250

Russell Ephraim: Reducing it for these tax payments was just too much for them to bear. They just didn't want to do it. So some of these partners would normally not make their estate tax payments till later in the year they would push them off. But when you do this, and you have an entity, and you have partners that you're together making these payments, and you're trying to make them timely to not pay interest and penalty.

00:18:10.250 --> 00:18:19.859

Russell Ephraim: They're no longer allowed, or no longer able to push off their payments. So that became an issue for them. They decided to stop electing in for that reason.

00:18:20.940 --> 00:18:28.230

Russell Ephraim: And then I have another friend that just administratively didn't want to do New York City. So New York and New York City both had Pfe

00:18:28.557 --> 00:18:38.549

Russell Ephraim: new York was enough for them like it wasn't worth it for them for the number of New York City partners they had to elect into the P test. That's just an administrative issue that they didn't want to deal with.

00:18:40.800 --> 00:19:07.260

Angelika J. Herburger: So let's get into an example to see how this could work in a real scenario. So we're going to look at the New York Ptet. So for this scenario the taxpayer is an attorney receiving a schedule k. 1, from his law firm, which is taxed as a partnership. New York State resident filing status single. The only state the entity operates in is New York, just to keep it simple. No other nonresident states don't have Ctmt.

00:19:07.590 --> 00:19:33.309

Angelika J. Herburger: No itemized deductions other than State and local taxes, compensation of 750,000 per year. The law firm elects into the New York Ptec. For 2024, and the attorneys, new York, Ptec. Credit, flowing through the individual return is 75,000, which is pretty typical. 10% rate on the income for a large law firm that that makes sense. So it's a pretty realistic scenario.

00:19:34.750 --> 00:19:55.310

Angelika J. Herburger: So let's look at the tax liability comparison. If the entity does not elect into the Pt. The partner will have 750,000 of income, about $270,000 of Federal tax, about 52,000 of New York State tax for a total tax liability of 320,000.

00:19:55.660 --> 00:20:07.760

Angelika J. Herburger: If the entity does make the Pt. Election. Now, the income has been reduced to 6, 75, because they're getting that $75,000 deduction at the entity level for the New York Pt. That was paid over

00:20:08.289 --> 00:20:18.080

Angelika J. Herburger: to the State Government Federal tax of 240,000. And the tax is lower. Obviously because the income is lower. Lower self-employment tax as well.

00:20:18.340 --> 00:20:44.550

Angelika J. Herburger: The New York State tax is going to stay relatively the same. The Pt. Is not deductible at the State level. It has to be added back to your income. So the benefit is really seen at the Federal level, not at the State level. The small difference here relates to a deduction for self-employment income. But overall the New York tax liability is going to stay pretty much the same. So you're looking at a total tax liability of about 290,000

00:20:44.590 --> 00:20:58.049

Angelika J. Herburger: if if the entity makes the election. So that's a total tax savings of about $32,000, which is a pretty nice savings, just by the entity making this election into New York. Pt.

00:20:58.850 --> 00:21:16.560

Angelika J. Herburger: so sometimes, when an entity elects into the Pt. The partners have a hard time understanding how they're actually benefiting because they're seeing less cash in their pocket. So let's look at this from a cash perspective. Now, as opposed to a tax liability perspective.

00:21:17.140 --> 00:21:28.599

Angelika J. Herburger: So from a cash perspective. If the entity does not elect. Pt, we're assuming here that the income and distributions are equal. So the partner gets $750,000 of cash.

00:21:28.730 --> 00:21:39.950

Angelika J. Herburger: The partner will pay over the 2 70 to the Irs. They'll pay over the 51,000 to New York State, and they'll have a net cash of 430,000 in their pocket.

00:21:40.580 --> 00:22:00.030

Angelika J. Herburger: Now, if the entity does elect in now, the partner is only getting a distribution of 675, because the entity is withholding that 75,000 that they paid in for pizza, and that that partner is getting the credit for on their New York State personal tax return they'll pay over the Federal tax payments of 240,

00:22:00.400 --> 00:22:29.160

Angelika J. Herburger: and when they file their New York return they'll get a refund of the 25,000. So this goes back to what I mentioned before regarding the entity having a higher tax, liability or tax rate than they would at the individual level. In this case, that 10% rate that the entity withheld that pted at was higher than what the partner owed on their individual tax return. So now they're getting this refund of 25,000 back after they file their individual tax return.

00:22:29.400 --> 00:22:59.320

Angelika J. Herburger: So the net cash after that is 463,000. So the net cash increase to the partner equals that tax savings from the liability analysis. So even though sometimes it's hard for the owners to see the benefit because they're getting less cash in their pocket. It really does benefit them at the end of the day, and sometimes that analysis needs to be shown to the owners for them to truly understand what the benefit is of making the P Ted election at the state level.

00:23:01.317 --> 00:23:06.290

Angelika J. Herburger: So I'm going to turn it over to Russ. And we're going to talk about the updates now that are going on in Congress.

00:23:07.810 --> 00:23:15.534

Russell Ephraim: Yeah, I'm gonna discuss how some of the things being proposed in the one big, beautiful bill will affect the pastor entity tax.

00:23:16.110 --> 00:23:30.939

Russell Ephraim: the one big beautiful Bill passed the House and moves to the Senate on May 20 second. The Senate has it now, so if they make any significant changes, it goes back to the House for approval, but if they don't, and it all goes to plan they, the goal is to have it signed by the President by July 4.th

00:23:31.270 --> 00:23:52.770

Russell Ephraim: The bill includes an increase of the State and local tax deductions of 40,000 for married couples, with income of 500,000 or less. So this will phase out from 40,000 down to the 10,000 that it is now, as taxpayers, income increase to 600,000. So anyone with income over 600,000 will still be capped to the 10,000 that it is today.

00:23:53.163 --> 00:24:05.070

Russell Ephraim: The income level will be indexed for inflation by 1% until 2,033. I believe the $40,000 limit is going to be indexed as well. Previously the $10,000. Cap was never indexed, so it just stayed at 10,000.

00:24:06.372 --> 00:24:19.390

Russell Ephraim: So what interplays with this is the new standard deduction is increasing to 30,000. So the increase in salt cap is really only helping a narrow band of people who are itemizing with deductions above 30,000,

00:24:19.500 --> 00:24:32.880

Russell Ephraim: but are not limited by the income limitation of 500,000. So, in other words, if you live in a high income tax state, you'll most likely not benefit from the $40,000 limit. As by the time you've accumulated $40,000 of State taxes, you've hit the income limit.

00:24:33.120 --> 00:24:36.780

Russell Ephraim: So there's some narrow band of people that have

00:24:36.930 --> 00:24:45.610

Russell Ephraim: a lot like high real estate taxes, and they they make under the 500,000. That's who's going to benefit from this. The most everyone else is still going to need the P. The P. Ted.

00:24:46.200 --> 00:24:54.599

Russell Ephraim: So so why does it matter so so for circling back to the pastor entity tax, which is there to skirt the salt cap? To begin with.

00:24:54.730 --> 00:24:58.510

Russell Ephraim: the pastor entity tax will still help them, so

00:24:58.890 --> 00:25:03.900

Russell Ephraim: as as it has been in 2,017. So the problem this time.

00:25:04.324 --> 00:25:09.219

Russell Ephraim: It's only going to help some of us. So under the tax Cut and Jobs Act 717,

00:25:09.490 --> 00:25:15.269

Russell Ephraim: Congress added the 1 9, 9, 8 deduction, which was a 20% deduction on pastor income

00:25:15.847 --> 00:25:22.400

Russell Ephraim: for businesses that can full utilize it effectively, gave a pass through entity member, a 7% tax cut on their income.

00:25:22.610 --> 00:25:39.469

Russell Ephraim: The catch with 199 a is that not all industries receive the same benefit. So specified. Service trader businesses or Sstbs, we call them, were only allowed to deduction up to a certain amount of income, and then they were not entitled to deduction at all, it gets completely phased out.

00:25:39.550 --> 00:25:58.250

Russell Ephraim: So in the proposed bill, the Sstbs, which are industries where the principal businesses scale reputation employers, so accountants, lawyers, consultants. They're disallowed from using that blessed workaround the notice 2020 to 75 that Angelica mentioned before.

00:25:58.340 --> 00:26:16.520

Russell Ephraim: So they'll no longer be able to utilize the pastor entity tax. So this would. This would also remove the ability for pastor entities in New York City, Washington, DC. Texas, Tennessee, from deducting unincorporated business taxes, margin taxes, excise taxes that were always allowed in the past

00:26:16.670 --> 00:26:19.949

Russell Ephraim: before any salt limitations cause the need for our password 3 times.

00:26:20.230 --> 00:26:34.610

Russell Ephraim: So this means people who work in Sstvs will not receive the 20% deduction which is now 23% in the new bill. They will not receive the ability to use the pastor entity tax and or any entity level tax deduction that they had before.

00:26:35.110 --> 00:26:56.570

Russell Ephraim: So the issues commentators have with this, it doesn't promote the principle of tax neutrality. So businesses that are set up as corporations or non Sstvs. Anyone who's not in those fields like accounting or or law have a lower tax rate, and they can also deduct their estate taxes. So accountants, lawyers, consultants, and pastor entities can't do any of this.

00:26:56.660 --> 00:27:10.459

Russell Ephraim: This can stifle economic growth and lower competition in a lot of markets. So some advocates, such as our industry, where a lot of the firms are set up as partnerships, are writing letters to Congress expressing how this would affect these industries.

00:27:11.300 --> 00:27:13.259

Russell Ephraim: We could switch slides in one slide.

100

00:27:13.670 --> 00:27:37.300

Russell Ephraim: So it's it's important to keep an eye out on the current bill. What changes the Senate may make, and how it could affect your business once the bill is passed, in whatever form it may be. This essential to speak to your advisors to discuss the impact with all these little caveats in the bill. It's important now, more than ever, to analyze your business structure, its partners, individual tax situations, and how you may be able to maximize tax savings from the changes in this bill.

101

00:27:37.520 --> 00:27:39.528

Russell Ephraim: So there's always an opportunity,

102

00:27:40.160 --> 00:27:44.930

Russell Ephraim: when the law changes like this. But it's something you definitely need to look into

103

00:27:45.040 --> 00:27:49.000

Russell Ephraim: in the next couple of weeks like.

104

00:27:50.080 --> 00:28:06.410

Russell Ephraim: So if you have any questions. This is where you can reach us. This is our email and phone number. You could send us an email. If you have any questions on the presentation, or if you have any questions or anything else, if you help structuring your business, or you want us to discuss with you how some of these tax changes might impact you.

105

00:28:06.740 --> 00:28:07.520

Russell Ephraim: Thank you.

106

00:28:08.430 --> 00:28:35.790

Jonathan Shenkman: Great. Thank you so much. Angelica and Russell. If anyone has any specific questions, new business opportunities, any other issues they'd like to discuss. Please feel free to reach out directly to Angelica Russell or myself where appropriate, and I'll be sure to include their contact information in the follow up email to this program. As I mentioned at the onset, the goal of these programs stay up to date on timely wealth management, related topics, and to collaborate where appropriate, and I think we can all agree that the clients who are best prepared are the ones who are served by team of knowledgeable advisors.

107

00:28:36.150 --> 00:29:01.139

Jonathan Shenkman: 3 more quick items before I let you go first.st My next webinar is on Tuesday, June 17, th at 8 30 Am. Featuring yours truly, Jonathan. I. Shankman, where I'm going to discuss impact investing how to make a difference with your wealth in 2025 and beyond. And I'll be sure to send out the invitation to this program in the coming days. In the meantime, I'd love to continue to grow this webinar community. So if you have a friend or colleague or client who like to be notified of my upcoming webinars. They

108

00:29:01.140 --> 00:29:24.370

Jonathan Shenkman: email me with the word webinar in the subject line, and I'll add them to my webinar distribution list. My email is Jonathan at parkbridgewealth.com. Second, you can follow all my work on extant and Instagram at Jonathan on money, and by connecting with me on Linkedin. You could also listen to my weekly podcast called Jonathan on money, which is available on apple, spotify, or wherever you get your podcasts and you can watch my practical planning videos, which I post several times a week

109

00:29:24.370 --> 00:29:42.670

Jonathan Shenkman: by following me on Youtube at Jonathan, on money as well. And 3, rd please take 30 seconds to fill out my survey at the end of this program. It helps me improve my webinars and provide timely and interesting content to attendees, and I thank you in advance for that. And with that this concludes today's session, please stay safe and healthy and have a wonderful day. Everybody.

110

00:29:44.130 --> 00:29:45.230

Angelika J. Herburger: Thanks for having us.