Converting from S corp. to C corp.: Select issues for consideration

Closing thoughts It is axiomatic that when individual income tax rates decrease relative to corporate income tax rates, more business owners will choose to organize as passthrough entities than as C corporations. [...]it is reasonable to expect that as a result of tax reform, which provides for a significant decrease in the federal corporate tax rate from 35% to 21% and a more modest decrease in passthrough tax rates, business owners may consider revoking S corporation elections that were made when the corporate rates were higher. Tax reform has further increased the attractiveness of revoking an S election in favor of C corporation tax treatment, not only through a reduced C corporation federal income tax rate but also by increasing the spread on unfavorable Sec. 481(a) adjustments necessitated by those conversions, e.g., required changes from the cash method to the accrual method. From T. Christopher D'Avico (Chris.D'Avico@rsmus.com), J.D., LL.M., New York City; Lauren Pope Stalls (Lauren.Stalls@rsmus.com), CPA, Greensboro, N.C.; and Ed Decker (Ed.Decker@rsmus.com), CPA, Washington It is axiomatic that when individual income tax rates decrease relative to corporate income tax rates, more business owners will choose to organize as passthrough entities than as C corporations.