Late in December, many local attorneys and law firm administrators were following the Republican tax plan with great anticipation of bringing home fatter paychecks with all that was being negotiated between the House and Senate. A preliminary review by the CPA community tells a different story, and the American Institute of Certified Public Accountants is asking the IRS for immediate guidance with 39 separate areas included in the Tax Cuts and Jobs Act.

Today, most modern law firms are set up in various partnership and corporate structures that essentially let most of a firm’s profits flow directly to the equity partners’ or shareholders. Common partnership entities include PL, LLLP, PLLC and LP while corporate structures fall into either a C-corporation or subchapter S-corporations. With the exception of engineering and architecture firms, Congress decided not to offer the dramatic tax reductions provided to pass-through service businesses such as law, accounting, health, financial services, brokers, athletes, consulting firms, etc. unless certain maximum taxable income levels are not exceeded.

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