Committee explores HB350 taxing large pass‑through entities; seeks revenue modeling and Department of Revenue input

The House Labor and Commerce Committee discussed House Bill 350 on March 16, a proposal that would impose a tax on S corporations and similar pass‑through entities with qualifying taxable income above $25 million and apply a rate aligned with the state's existing C‑corporate tax (the sponsor and members discussed a 9.4% starting point).

Co‑chair Fields, the bill sponsor, said HB350 aims to capture revenue from large pass‑through firms as the state economy grows so the state can fund core services without unfairly targeting one industry. Fields said the bill is not intended to single out a sector and that mirroring the C‑corp rate would reduce incentives to change entity form solely for tax advantage.

Committee members pressed for economic modeling and implementation details. Representative Sadler asked how the 9.4% figure was chosen and whether the bill has been analyzed for effects on major local taxpayers and investment decisions; Fields said the rate is tied to the existing C‑corp rate and staff will ask the Department of Revenue to provide implementation and coverage analysis. Representative Klum and others requested regression or comparative analysis across states with similar regimes and asked whether a graduated rate structure might be preferable for smaller pass‑through businesses.

Members also asked how the state would determine which entities cross the $25 million threshold and whether self‑reporting with audit authority would be required; sponsor and staff described approaches used in other states, including informational filings with audit backstops, and said the committee will ask Revenue to provide more detail. No public testimony was offered.

The committee did not vote on HB350. Members agreed further hearings should include Department of Revenue staff and that major bill changes should trigger additional public testimony. The meeting adjourned at 4:51 PM.