After May 12’s release of budget reconciliation bill language, the House Ways & Means Committee met on May 13 to pass its portion of the bill.

The AICPA said that although it applauds the committee's work—including several tax provisions that the AICPA has been supporting, the bill also has provisions that the AICPA has in the past shared considerable concerns about because of the possible downsides they would have on passthroughs, which comprise the vast majority of businesses.

“While the AICPA remains grateful for the diligent work of the Ways & Means Committee to provide taxpayers and practitioners with common-sense tax policies that will have a continued benefit to the country and on the tax administration process, we remain deeply troubled by the proposed changes to the PTET deduction," AICPA President & CEO Mark Koziel stated. "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 passthroughs.” 

The AICPA states its "strong endorsement" of these reconciliation bill provisions:

• An increase in the standard deduction for the 2025-2028 years. 

• Making the tax bracket rates in the Tax Cuts & Jobs Act (TCJA) permanent. 

• Legislation expanding the utilization of section 529 accounts for costs associated with obtaining a post-secondary credential, offering financial flexibility to those pursuing or advancing in the accounting profession—a longstanding priority for both the AICPA and the accounting profession.

• Repeal of the American Rescue Plan Act’s lowered threshold for Form 1099-K to $600 for an unlimited number of transactions; the reconciliation legislation will go back to a $20,000 threshold and more than 200 transactions.

• Provision about section 174 research and experimental expenditures, which may currently be expensed for domestic research or experimental expenditures under new section 174A.

• Provision regarding the Paid Family and Medical Leave Tax Credit Extension and Enhancement Act, which would provide certainty to businesses by making a temporary paid family leave tax credit permanent.

• Retention of the TCJA higher exemption amounts for the individual alternative minimum tax (AMT), simplifying filing for many taxpayers.

• Provision regarding section 163(j),  reinstating EBITDA limitation.

• Retention of the Section 199A qualified business income (QBI) deduction, increased QBI deduction and modification of the specified service trade or business (SSTB) limitation.

• Preservation of the current availability of the cash method of accounting for tax purposes.

Meanwhile, the AICPA also has considerable concerns about certain provisions in the reconciliation legislation, including the following:

• The proposed bill will "unfairly exclude" SSTBs from deducting state and local income taxes  on the partnership level, which is now permitted. The targeting of SSTBs would indirectly increase the taxes on millions of service-based businesses and expand the gap in how the tax code treats C corporations compared to passthrough entities. The AICPA thinks that Congress should retain the current ability for passthrough entities—which comprise the vast majority of—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.

“It is integral that we have parity among all types of entities; the AICPA is committed to ensuring that the guiding principles of good tax policy and the interests of taxpayers and tax practitioners are taken into account during the reconciliation process, as these policies will have a significant impact on both," Koziel noted, "We will continue advocating for policies that exemplify the guiding principles that drive success throughout the profession. 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.”