The tax reform bills introduced in the House of Representatives and the Senate dramatically reduce the corporate tax rate from 35% to 20% and create added incentives for taxpayers to invest capital into U.S. businesses with expanded expensing and reduced flow-through rates.
But the bills were drafted quickly, Congress is rushing to get them passed by the end of the year, and the Internal Revenue Code is a complicated thing. Unintended consequences result, and pass-throughs offer opportunities. In fact, a drafting glitch may provide hedge and lending fund investors with an inadvertent tax reduction.