Joint Ventures Involving Tax-Exempt Organizations, 4th Edition

CHAPTER 6Engaging in a Joint Venture: The Choices

1. § 6.1 Introduction
2. § 6.2 LLCs (Revised)
3. § 6.3 Use of a For-Profit Subsidiary as Participant in a Joint Venture
4. § 6.5 Private Foundations and Program-Related Investments
5. § 6.6 Nonprofits and Bonds (Revised)
6. § 6.7 Exploring Alternative Structures
7. § 6.8 Other Approaches

§ 6.1 INTRODUCTION

p. 490. Insert the following new subsection at the end of this section:

(a) Impact of The 2017 Tax Act (Pub. L. No. 115-97) of Choice of Entity and Partnership Taxation

Although the core infrastructure of Subchapter K was left in place by the 2017 Tax Act (Pub. L. No. 115-97), there are significant implications on the choice of entity for business as well as compensation policy. First Congress lowered the corporate income tax rate to 21 percent, which is a 40 percent decrease from the 35 percent top rate previously in effect. Accordingly, although the corporate rate is now significantly lower than the highest individual marginal rates that apply to pass-through businesses, there is still remaining a double tax in the corporate structure.

Nevertheless, even with the double tax, it may be an attractive structure if business is willing to leave the earnings in the corporation to compound at the preferential rates by being taxed at 21 percent rather than distribute its earnings to its shareholders (or otherwise compensate them). Other issues arise such as the case where the shareholders also are employed by the company and are to be receiving ...