A tax reform measure under consideration by Congress would have a major effect on many large and midsize law firms, immediately increasing, if passed, how much partners have to pay in taxes and possibly how they bill clients.
The proposal is part of a "discussion draft" on taxation of small businesses and pass-through entities released in March by Representative Dave Camp, R-Mich., chairman of the tax-writing Ways and Means Committee. The bill would require partnerships with annual revenue of $10 million or more to change to the accrual method of accounting, in which partners are taxed on earned income. Most law firms now use the cash method, where partners pay taxes on earnings they actually collect.
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