Andrew Lopez and Kevin Zanni

This article is the second article in a series of three intended to discuss the recent changes in income tax policy and how changes may impact business value. The first article provided general observations related to the new tax policy. This second article will focus on pass-through entities and qualified business income (“QBI”) deductions. The third article will focus on C Corporations and income tax policy related to the qualified small business stock (“QSBS”) gain exclusion.

To value a business or business interest analysts typically consider the current taxation policy commensurate with the valuation date. Business owners should be aware that analyst consideration of relevant income tax policy requires more than the selection of the effective income tax rate to apply. It requires an understanding of how (1) tax election can impact value, (2) bonus depreciation impacts value, and (3) treatment of research and development expense impacts business earnings. In this article, we will discuss recent changes in U.S. tax policy and the respective value implications to pass through entity business owners.

Download the article: OBBBA consideration for Pass-Through Entities