He points out that a business may choose to become
a C corporation or an S corporation. In the C corp, the tax rate has been 35 percent and the corporation pays taxes on its own income. (Tax rates are projected to change for the better under the Trump administration, so the 35 percent rate may drop.) “As an owner who works for the C corp business,
you become an employee of the business rather than being self-employed,” Howell says. “In many cases, your salary can be used as a deduction by the business.” He says not all corporations are C corps. The reason
is that when you distribute profi t in a C corp, there is a second tax. So in the long run, it may be cheaper to not be structured as a C corp. The S corp may be the alternative. “An S corp is
a hybrid, in that the income is passed through to the owners, and they pay taxes as a partnership,” Howell says. “There is difference between the S corp and a partnership. In a partnership, if I want to take out an asset, I can distribute it to its owners. Most of the time it is not taxable. But in an S corp, this is treated as a sale and it triggers a tax.” Howell stresses that if he is advising a ranch or
farm owner —with current tax laws — he would not advise a C or S corp. “The reason is that land appreciates in value,” he
says. “For example, if you put a ranch into a corpo- ration entity, and then want to move it in 15 years or split it in two, that will trigger a tax, most likely as a corporation, because the value of that land has gone up. “Whereas if you use an entity that is taxed as a
partnership, you can move the land and not trigger a tax on appreciation.” Also, in a general partnership, if the farmer or
rancher receives CRP payments or other government ag payments, and he and his wife own land outright individually, they have 2 payment caps. “If there are kids who also own land, then you have 3 or more caps in the partnership.”
Group health insurance, still high under a partnership As an insurance benefi t advisor, Rose sees the shock
of infl ated health insurance rates being felt among individuals and families, including those who qualify for group plan under a partnership. “It has become so unaffordable that, when you have to choose between having health insurance or putting food on the table, it’s usually not health insurance,” she says.
86 The Cattleman January 2017
Charla Rose, Upshaw Insurance
Rates for 2016 were bad enough. But for 2017, the
rates have more than doubled in some cases. For ex- ample, First Care, a regional insurance carrier in West Texas, raised its rates by close to 50 percent for individual policies. Blue Cross Blue Shield rates were jacked up by 60 percent. “Blue Cross Texas lost right at $1 billion in 2014
and 2015,” Rose says. “So on Jan. 1, 2016, Blue Cross (and other carriers) moved people from their PPO plan (Preferred Provider Organization) to their HMO product (Hospital Maintenance Organization). There were still losses. For 2017, UnitedHealth Care and Humana are not offering individual policies in most areas of the U.S.” It gets down to fi nding insurance carriers that offer
individual plans in your area. That can be diffi cult. “In West Texas, for example, we’re down to 2 carriers, First Care HMO and Blue Cross. First Care has a good provider network, but if you need a specialist for can- cer or medical treatment in Dallas or Houston, those are not in the First Care area. That doesn’t suit some people’s lifestyles. “Blue Cross is a national HMO. They require you to
go through a primary physician to get to a specialist. In West Texas, we don’t have many primary care physi- cians who accept Blue Cross HMO coverage. Many of the ones who do are not taking new patients.” Even though few individual plans are available,
there are many group plans offered by carriers, Rose says, “which gives them access to better coverage, more provider networks and in most cases, lower costs.” Rose provides these examples of health care poli-
cies for 2017: • For a 63-year-old male, a group plan with a $6,550 deductible and no co-pays has a premium of about $786 per month with a PPO. For an individual policy from Blue Cross through their HMO, the premium
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