Congress Passes Tax Package; AICPA Sees Pros and Cons
Congress on December 20 gave final approval to the most significant rewrite of the nation’s tax code in more than three decades. The $1.4-trillion tax package cuts individual rates for eight years and slashes the top corporate tax rate to 21 percent permanently. The measure now heads to the President’s desk for his signature.
AICPA President and CEO Barry C. Melancon, CPA, CGMA, said the tax reform legislation contains several provisions that should be welcomed by CPAs and their clients, but expressed disappointment over lawmakers’ decision to exclude CPAs from the measure’s treatment of pass-through entities.
“Congress should have provided parity for pass-throughs, regardless of their line of business, in order to achieve a fairer, simpler, and more competitive tax code,” he explained in a statement. “The AICPA pointedly and repeatedly made the case that all professional service firms – including accounting firms – should have received the new deduction. The professional services sector, a critical element of America’s economic success, has been ignored. Accounting firms play an important role in the nation’s growth and job creation and legislators erred in excluding them. Those who suggest that CPA firms can adjust to the change by reforming as C corporations do not understand that the nature of state licensing regulations make such a transition impractical, if not impossible.”
The AICPA’s advocacy led to the inclusion of several beneficial provisions in the final tax package. Specifically, Congress expanded the number of taxpayers who may use the cash method of accounting without further restricting its use. Lawmakers also retained the business interest expense deduction for small businesses (under $25 million), preserved the current tax treatment of nonqualified deferred compensation, simplified the kiddie tax, simplified the inventory rules for small businesses, expanded the exception for small businesses from the uniform capitalization rules, removed computer or peripheral equipment from the definition of listed property, provided consideration of an inflation index, allowed nonresident aliens as qualifying beneficiaries of an electing small business trust, repealed the PEASE phase-out of itemized deductions, repealed the technical terminations rule for partnerships, and repealed the corporate Alternative Minimum Tax, all of which were profession goals.
In anticipation of implementation of these and other changes to the tax code, Melancon said the AICPA is prepared to guide members through the legislation’s intricacies and impact. “The nation’s CPAs can count on us during this time of transition – and beyond,” he said.
The AICPA’s Tax Reform Resource Center offers constantly-updated information, videos, and resources for members, and Tax Season Resources for CPAs will provide information on implementation guidance that impacts the upcoming filing season.
