Final answer:
Pass-through entities, such as partnerships and S corporations, are concerned about changes in the corporate tax code because it can affect the tax liabilities and financial situation of the owners. Pass-through entities do not pay taxes at the entity level; instead, income or losses are passed through to owners and reported on their personal tax returns.
Step-by-step explanation:
Pass-through entities, such as partnerships and S corporations, are concerned about possible changes in the corporate tax code because they are taxed differently than traditional corporations. Pass-through entities do not pay taxes at the entity level, but instead, the income or losses are passed through to the owners or shareholders, who report them on their personal tax returns. If there are changes in the corporate tax code, it could affect the tax liability and financial situation of the owners of pass-through entities.
For example, if there is a decrease in the corporate tax rate, it may incentivize business owners to convert their pass-through entity into a traditional corporation to take advantage of the lower tax rate. On the other hand, if there is an increase in the corporate tax rate, it could result in higher tax liabilities for the owners of pass-through entities.