The proposed amendment is to relieve S Corp shareholders from a proposed new tax.  The AICPA has sent a letter to congress, urging that the new provision be stricken or modified.  The American Jobs and Closing Tax Loopholes Act of 2010, has passed in the House and is being debated in the Senate, including this controversial provision (section 413), that affects the self-employment tax treatment from some small businesses and CPA firms that are set up at S Corporations and Limited Partnerships.

This provision would require that certain S Corporation owners, and Limited Partners would be subject to self-employment tax on their share of distributive profits in excess of salary/guaranteed payments for service.

The AICPA on June 9th, in response to this provision, sent a letter to the Senate Finance, and House Way and Means Committees, asking them to reconsider the proposal and also offering suggested changes. On June 14th, Senate Amendment 4342 was introduced to strike the proposal from the bill.  Also on the 14th, the AICPA sent letters to U.S. senators urging them to support the amendment.