Mandatory Passthrough Taxation for Non-Publicly Traded Businesses?

Abstract

Should passthrough taxation be made mandatory for all businesses whose equity is not publicly traded? In the current tax policy environment, every business that is or becomes a non-publicly traded business has access to passthrough taxation, but not without — in some cases — significant tax costs. Employing a perspective that corporate tax integration is desirable and should be encouraged, this article examines whether passthrough tax treatment should be made mandatory for such companies. In the end, the answer is no; it should not be made mandatory. However, the exercise of answering the question highlights several incremental tax law reforms that could be adopted to advance the project of corporate tax integration.