American Institute of CPAs president and CEO Barry Melancon issued a statement Wednesday following passage by Congress of the Tax Cuts and Jobs Act expressing disappointment that the bill doesn’t give CPA firms the same favorable tax treatment provided to other pass-through entities.
“While the tax reform legislation contains several provisions that should be welcomed by CPAs and their clients, the AICPA is very disappointed by lawmakers’ decision to exclude CPAs from the measure’s treatment of pass-through entities,” said Melancon. “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 pointed out that the AICPA has repeatedly made the case to Congress 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,” said Melancon. “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.”
On the plus side, Melancon noted the AICPA did manage to get some favorable provisions in the final legislation.
“The AICPA’s advocacy led to the inclusion of several beneficial provisions in the final tax package,” he said. “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of an inflation index, allowed nonresident aliens as qualifying beneficiaries of an electing small business trust, repealed the PEASE phase-out of itemized deductions, repealed the technical terminations rule for partnerships, and repealed the corporate Alternative Minimum Tax, all of which were profession goals.”
CPAs will be kept busy dealing with the impact of the legislation for years to come. “In anticipation of implementation of these and other changes to the tax code, the AICPA is prepared to guide our members through the legislation’s intricacies and impact,” said Melancon. “The nation’s CPAs can count on us during this time of transition—and beyond.”
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