H.R. 4453, Permanent S Corporation Built-in Gains Recognition Period Act of 2014

May 1, 2014
Cost Estimate
As ordered reported by the House Committee on Ways and Means on April 29, 2014


As ordered reported by the House Committee on Ways and Means on April 29, 2014

H.R. 4453 would amend the Internal Revenue Code to make permanent a five-year recognition period for built-in gains of S corporations, retroactive to January 1, 2014. Under current law, a corporation that meets certain requirements may elect to be taxed as an S corporation, which generally pays no corporate-level tax, unlike a C corporation. For corporations that convert from C corporations to S corporations, or S corporations that receive assets under certain conditions from C corporations, there is a corporate-level tax on certain built-in gains of certain assets, with a 10-year recognition period under current law. This legislation makes permanent the five-year recognition period for S corporation built-in gains that was generally in effect for taxable years from 2011 through 2013. The legislation also applies to regulated investment companies and real estate investment trusts.

The staff of the Joint Committee on Taxation (JCT) estimates that enacting H.R. 4453 would reduce revenues, thus increasing federal deficits, by $1.5 billion over the 2014-2024 period.

The Statutory Pay-As-You-Go Act of 2010 establishes budget-reporting and enforcement procedures for legislation affecting direct spending and revenues. Enacting H.R. 4453 would result in revenue losses in each year beginning in 2015.

JCT has determined that the bill contains no intergovernmental or private-sector mandates as defined in the Unfunded Mandates Reform Act.