The AICPA endorsed 10 tax provisions recommended by the House Ways and Means Committee for the budget reconciliation bill that Congress is compiling, while urging changes to two items.
The language in the 389-page proposed bill extends many provisions that were enacted in 2017 in the Tax Cuts and Jobs Act (TCJA), P.L. 115-97, and that are set to expire in the near future. Other tax priorities of the Trump administration, including eliminating income taxes on certain tips and overtime pay, are also addressed in the proposed bill.
The AICPA said in a news release Tuesday that it strongly endorsed the following provisions:
- Increased standard deduction for tax years 2025-2028: This provision would make the TCJA’s increased standard deduction amounts permanent. For tax years 2025 through 2028, the Joint Committee on Taxation said the intent is to increase the standard deduction for married taxpayers filing jointly and surviving spouses by $2,000. For heads of household, the standard deduction amount would increase by $1,500, and the amount for all others would increase by $1,000.
- Make the tax bracket rates under the TCJA permanent.
- Expanded use of Sec. 529 accounts for costs associated with obtaining a post-secondary credential: The AICPA said this expansion — “a longstanding priority for the AICPA and the accounting profession” — grants financial flexibility to those pursuing or advancing in the accounting profession. The change would apply to distributions made after the date of enactment.
- Repeal of the $600 threshold for Form 1099-K: Revert to the prior rule for Form 1099-K, Payment Card and Third Party Network Transactions, reporting, under which a third-party settlement organization would not be required to report unless the aggregate value of third-party network transactions with respect to a participating payee for the year exceeds $20,000 and the aggregate number of such transactions with respect to a participating payee exceeds 200. The threshold has been phasing down and is scheduled to be $600 starting next year.
- Provision regarding Sec. 174 research and experimental expenditures: The specified expenditures may now be expensed for domestic research under new Sec. 174A.
- Paid Family and Medical Leave Tax Credit Extension and Enhancement Act provision: This would provide certainty to businesses by making a temporary paid family leave tax credit permanent, the AICPA said. Under current law, it will expire after this year.
- Retention of the TCJA higher exemption amounts for the individual alternative minimum tax: Thissimplifies filing for many taxpayers, the AICPA said.
- Sec. 163(j) interest limitation provision: The bill would reinstate the EBITDA limitation under Sec. 163(j) for tax years beginning after Dec. 31, 2024, and before Jan. 1, 2030. Therefore, for purposes of the Sec. 163(j) interest deduction limitation for these years, adjusted taxable income would be computed without regard to the deduction for depreciation, amortization, or depletion.
- Retention of Sec. 199A provisions dealing with QBI: The Sec. 199A qualified business income deduction (QBI) would be made permanent, and the deductible amount for each qualified business would be increased to 23% from 20%. The phase-in of the limit under Sec. 199A(b)(3) would change to 75% of the excess of the taxpayer’s taxable income over the threshold amount, The bill also creates a new type of income that would qualify for the deduction: qualified business development company (BDC) interest dividends.
- Preservation of the current availability of the cash method of accounting for tax purposes.
The AICPA opposes certain other provisions because of “the potential detrimental impact they would have on pass-throughs, which make up the vast majority of businesses,” it said in the news release.
Those two provisions are:
- Exclusion of specified service of trade businesses (SSTBs) from deducting state and local income taxes at the partnership level, as is permitted now. The AICPA said the exclusion would indirectly increase taxes on millions of service-based businesses and expand the disparity in how the tax code treats C corporations versus pass-through entities. The AICPA said Congress should retain the ability for pass-through entities to deduct the entity’s state and local taxes at the federal level.
- The permanent suspension of personal casualty loss deductions not attributable to federally declared disasters. The AICPA has supported reinstating the casualty loss deduction to pre-TCJA rules.
The AICPA remains “deeply troubled by the proposed changes to the PTET (pass-through entity tax) deduction. The changes to this vital deduction are unfair to businesses that are the backbone of the American economy, which include accounting firms, medical offices and Main Street businesses, of which the majority are structured as pass-throughs,” AICPA President and CEO Mark Koziel, CPA, CGMA, said in the news release.
“Treating any service business more harshly does not seem to follow the principles of good tax policy, such as neutrality, simplicity, fairness, certainty, and transparency,” Koziel said.
— To comment on this article or to suggest an idea for another article, contact Martha Waggoner at Martha.Waggoner@aicpa-cima.com.
