Tax Reform Resource Center

Tax Reform Resource Center




Tax reform has been a topic of discussion in Congress for more than six years. The recent election has aligned the House, Senate and White House in accomplishing that goal, making tax reform possible in the 2017-2018 timeframe.

The Tax Reform Resource Center will keep you informed of what has been proposed or passed in Congress, and will be updated frequently with news, analysis, resources and the information you need to understand how coming changes will affect you and your clients. Ed Karl, AICPA VP Taxation, provides an introduction in this Washington Tax Reform Developments video. Bookmark this page and visit often for updates. The AICPA is dedicated to being your home for comprehensive coverage of tax reform as it unfolds. 

This resource center is sponsored by the AICPA Tax Section. Join the Tax Section today.


Stay up to date with the latest developments in tax reform by listening to our featured video. Learn what is going on in Washington that may impact you and your clients, and what to expect with potential tax law changes. We will update our featured video frequently so you'll have the latest insight at your fingertips.



 

Featured Video: Tax Reform: Then and Now, July 14, 2017

Listen to former IRS Commissioner Larry Gibbs discuss the factors paving the way for the Tax Reform Act of 1986.  And hear his predictions on what we might expect for tax reform in the coming months in this three-part interview series with Edward Karl, AICPA VP - Taxation.

Additional Videos:

  • Tax Reform Update, April 26, 2017
  • Tax Reform Update, April 5, 2017
  • Tax Reform Update, March 2, 2017
  • AICPA Tax Reform Advocacy Efforts, March 2, 2017 
  • How to Get Your Clients Prepared for Tax Reform, Feb. 27, 2017 
  • Tax Reform Update, Feb. 8, 2017 
  • Tax Reform Update, Jan. 12, 2017 

 

 

Reviewed July 20, 2017

The subsequent tax law changes results in a lot of uncertainty. The FAQs below help clarify some of the key issues currently surrounding tax reform.  (Updated 7/19/17)

 

I’ve heard about tax reform for many years with no results. Is it really going to happen?

Congress has discussed a fundamental approach to tax reform for about the last six years. Hearings, discussions, a tax reform proposal released by then-chair of the House Ways and Means Committee Dave Camp, five working groups set up by the Senate Finance Committee, and last June, a tax reform blueprint released by the House Republican leadership. So what has changed to suggest that CPAs should really focus on the possibility that tax reform could actually happen? 

A new Republican administration, together with Republicans holding the majority in both the House and Senate, has created the best opportunity for enactment of fundamental reform since 1986.

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What is the potential timing for the enactment of a tax reform bill?

Congress goes on recess from the end of July through Labor Day. When they return, a September 30 fiscal cliff will be looming with the fiscal 2018 funding bill needing resolution; the Federal Aviation Administration law, federal flood insurance and a children’s health insurance initiative are all set to expire; and a number of smaller provisions are also set to expire, including Coast Guard laws and some Medicare and Food and Drug Administration programs. Congress may be forced to adopt short-term fixes to keep the government running. Additionally, the Treasury Department estimates that the debt ceiling will be reached by the end of September or the beginning of October. And if that weren’t enough, the President has already tweeted that the country “needs a good ‘shutdown’ in September.”

In other words, September may be too busy for tax reform. We do believe there is a window of opportunity between October and early 2018 before the election cycle gets too distracting, although it’s possible that tax reform may look more like rate cuts. And we also believe that opportunity will include reconciliation in the Senate.

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What is AICPA’s philosophy regarding fundamental tax reform?

The proliferation of new income tax provisions since the 1986 tax reform effort has led to compliance hurdles for taxpayers, administrative complexity, and enforcement challenges for the Internal Revenue Service. The AICPA encourages Congress to examine all aspects of the tax code to improve the current rules. We stand for a code that is simple, practical, and administrable. The AICPA has consistently supported tax reform simplification efforts because we are convinced such actions will significantly reduce taxpayers’ compliance costs and encourage voluntary compliance through an understanding of the rules.

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What are the political forces impacting tax reform?

The three major focuses for the Republicans in the first 100 days of the new Administration are: (1) the repeal of the Affordable Care Act (Obamacare); (2) de-regulation in Washington; and (3) tax reform. At the GOP bicameral conference retreat in Philadelphia at the end of January, Republicans expanded their agenda timeframe to 200 days to accommodate the Senate’s responsibility to confirm 1,200 presidential appointments.

The Republican leadership has been debating the process of moving a tax reform bill in the Senate. One mechanism – budget reconciliation – is often used in the Senate to limit debate and amendments but can only be used once a year. Early in January, the Senate passed a budget resolution that will allow Republican lawmakers to pass a budget reconciliation measure enabling the repeal of the ACA with only 51 votes in the Senate. The House supported the measure.

What does this mean for tax reform?  Since the Senate used fiscal year 2017 reconciliation for ACA, tax reform could be considered under regular order, which means it would require a 60-vote supermajority in the Senate. Eight Democrats would have to vote for the proposal, assuming all Republicans also approve it. That may be a significant challenge, although there clearly is bipartisan support for tax reform.

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What are the barriers to passage of tax reform?

The level of partisanship in Washington is extreme, nevertheless, there is still bipartisan interest in tax reform. Notwithstanding that interest, crossing the finish line of signed legislation will not be easy due to challenges such as the ones listed below:

  • Creating a revenue-neutral bill. A focal point driving the current discussions of tax reform is lower individual and business rates. The House Republican Blueprint listed the following proposed rates:

    Individuals 

    Investments

    Corporations 

    Pass-Through Active Income 

     12%

     6%

     20%

     25%

     25%

     12.5%

     

     

     33%

     16.5%

       
Broadening the base – read that to mean eliminating deductions – to make up for these low rates will be a challenge. The changes will be fundamental and uncomfortable for many – there will be winners and there will be losers.
  • Managing ACA repeal/replacement. A key priority for the Republican leadership and the Administration, repealing and replacing the Affordable Care Act (Obamacare) is proving to be more of a challenge than anticipated, and seems to be contributing to a delay in taking up tax reform. On May 3, 2017, the House passed the American Health Care Act, a bill to repeal and replace ACA, and sent the measure to the Senate.  As of July 18, the Senate’s attempt to craft a similar repeal and replace measure was put on hold because the Senate leadership anticipated insufficient votes to pass the measure. 

  • Regular order or budget reconciliation. We’ve mentioned that there is generally bipartisan support for tax reform; however, the Democrats in the Senate have indicated they would like to tie infrastructure spending with tax reform. If the Republican leadership believes it can’t reach a 60-vote supermajority, the Senate may choose instead to win a slim majority of Republican votes using the budget reconciliation process. However, gaining universal Republican support in the Senate is not assured at this time.

  • Possible Senate resistance to a House bill. Senate Finance Committee Chair Orrin G. Hatch (R-UT) has raised concerns with aspects of the House Republican Blueprint and has indicated that the Senate may not just take up and pass a House tax reform bill. Specifically, Hatch has questioned the Blueprint’s border adjustability proposal, calling it a “significant shift” in business tax policy. Other members of the chamber have raised concerns regarding the impact of a border tax on the agriculture sector. Yet others have questioned whether a border tax would survive World Trade Organization scrutiny.

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I have a number of clients who own pass-through entities, but I hear the big changes are going to be in the C corporation area. Should I now convert these entities to C corporations even though there will be a second layer of tax?

Following developments to be able to react quickly on behalf of clients is important, but do not react or make decisions just yet. We only know the outlines of what is being considered – no details. There has been interest for years in lowering the corporate tax rate, but how to handle flow-through entities – which represent the vast majority of businesses in the US – has always been the question. You can see in FAQ No. 5 that there is consideration to provide a preferential flow-through tax rate but it would not be as low as the proposed corporate rate. A key issue in this discussion is how reasonable compensation will be handled. It makes sense to wait.

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I have individual clients who are close to being subject to estate taxes. Is the estate tax going away?

Eliminating the estate tax has been high up on the Republican tax agenda and is part of the Republican Blueprint. President Trump’s position during the election was to eliminate the estate tax and instead, tax appreciated asset values at death as capital gains. How will basis issues be handled?  Or gift taxes?  Keep a close eye on the developments but don’t make any decisions just yet.

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Read up-to-the-minute news articles published in the Journal of Accountancy, The Tax Adviser, and The CPA Advocate — AICPA's premier publications that provide superior content for today's CPA.


Revised Senate Health Bill Would Retain Taxes on Higher-Income Individuals, Journal of Accountancy, July 13, 2017
The health care bill released by Senate Republicans on Thursday would retain the Affordable Care Act’s 3.8% net investment tax and the 0.9% Medicare surtax.

Reconciling Tax Reform and Reconciliation, AICPA Insights, July 7, 2017
With recess approaching at the end of July for Congress, will there be a possibility of tax reform legislation to pass in the near future? Edward Karl, CPA, CGMA, AICPA Vice President - Taxation runs through the AICPA's efforts to date as well as the possibility for the use of reconciliation.

Tax Reform: Reality or Wishful Thinking?, Tax Section News, April 28, 2017
On April 26, the White House released their tax reform plan. Edward Karl, AICPA VP - Taxation, details the key aspects of the plan and highlights concerns that exist today with the ongoing tax reform legislation. 

The Pieces to Make Tax Reform Happen are Lining Up: Knight to H3?, AICPA Insights, March 7, 2017
After last November’s election, there was thought that a “once-in-a-lifetime” opportunity for fundamental tax reform might be further along than it is. Will we still get there? Edward Karl, CPA, CGMA, AICPA Vice President – Taxation, dusts off his “What will be the greatest driver of tax reform?” quiz.

Tax Reform in the 115th Congress?, AICPA Insights, Jan. 13, 2017

With Congress and the White House soon to be controlled by the same party, major tax reform could occur as early as 2017. What might new tax policies look like, and what circumstances could enable or hinder tax reform? Annette Nellen, CPA, CGMA, chair of the AICPA Tax Executive Committee, discusses the possibilities.

AICPA Outlines Tax Reform Priorities, The CPA Advocate, Dec. 15, 2016
The AICPA has identified several priorities that it would like to see incorporated in any tax reform proposal that advances through the legislative process during the next Congress.

30 Years After the Tax Reform Act: Still Aiming for a Better Tax System, The Journal of Accountancy, Oct. 1, 2016
The transformative 1986 legislation was necessary in its time, but tax reform is badly needed again to simplify a tax code that has grown too complex and to make the United States more competitive internationally.

House Republicans Offer 'A Better Way' for Taxes, The Tax Adviser, July 28, 2016
This article summarizes and critiques the latest significant proposal for reform.

Tax Reform: Beyond Lowering Income Tax Rates, The Tax Adviser, July 1, 2016
This column offers suggestions for comprehensive and meaningful tax reform.

CPAs Helping Guide Tax Administration and Affecting Tax Policy, The Tax Adviser, May 17, 2016
As it works through a long list of priorities and plans for its "future state," the IRS should look to CPAs, who based on their experience can provide a unique viewpoint.



How does the AICPA determine which legislative proposals to support or oppose? What are the AICPA's ideas for simplifying and reforming the Internal Revenue Code? How do members get involved?

The Tax Executive Committee oversees and ultimately approves the development of our tax policy positions. There are 10 technical resource panels, one committee, and several task forces involved in identifying issues, analyzing alternatives, and providing recommendations based on several factors (such as our members' own practice or business experiences), and in accordance with our Principles of Good Tax Policy.

Our tax leaders and AICPA staff are meeting with members of Congress and their staff, the IRS and Treasury officials, and key stakeholders to promote our tax reform ideas. We also submit formal comments, as needed; the AICPA is involved in a wide range of tax policy and advocacy activities. 


It's important for CPAs to stay up to date with legislative changes, the dynamic political environment, and the profession's tax reform advocacy efforts. Below are recent submissions that provide valuable suggestions on ways to improve our tax system. 

Annette Nellen testifying at a Senate Small Business and Entrepreneurship Committee Hearing on June 14, 2017

AICPA Tax Advocacy

Troy Lewis testifying at a House Small Business Committee Hearing on February 15, 2017

  • On July 17, 2017, the AICPA submitted four letters in response to the Senate Finance Committee’s request of June 16, 2017, for comments and recommendations from stakeholders, regarding comprehensive tax reform. The separate letters were submitted on the following areas of tax:
  • On June 22, 2017, the AICPA submitted a letter of support for the Investment in New Ventures and Economic Success Today (INVEST) Act of 2017 (S. 1144). This tax reform legislation, introduced by Senator John Thune (R-SD), would simplify, for small and medium-sized businesses and their owners, certain accounting rules and key parts of the Internal Revenue Code.
  • AICPA Written Testimony for the June 14, 2017 Senate Small Business and Entrepreneurship Committee Hearing, Annette Nellen, CPA, Chair of the AICPA Tax Executive Committee, testified on recommendations for small business tax reform at the U.S. Senate Committee on Small Business and Entrepreneurship hearing on “Tax Reform: Removing Barriers To Small Business Growth.”
  • AICPA Written Testimony for the Feb. 15, 2017 House Small Business Committee Hearing, Troy K. Lewis, CPA, Immediate Past Chair of the AICPA Tax Executive Committee, testified on recommendations for small business tax reform at the U.S. House Committee on Small Business hearing on “Startups Stalling? The Tax Code as a Barrier to Entrepreneurship.”
  • AICPA Dec. 21, 2016 Letter on the House Republican's Tax Reform Task Force Blueprint: The AICPA has provided input on the House Republican’s Tax Reform Task Force blueprint (“A Better Way” plan), released on June 24, 2016.  Our profession has long-advocated for certainty and fairness to the tax system because we are convinced such actions will reduce taxpayers’ compliance costs, encourage voluntary compliance through an understanding of the rules and greater respect for the system, and improve enforcement actions.  Our comments in this letter focus on areas of interest to professional service businesses.
  • Compendium of Tax Legislative Proposals, Dec. 14, 2016: Provides the AICPA's most recent list of ideas to simplify the federal tax system. The list includes recommendations in employee benefits, individual income tax, partnerships, corporations, tax administration, and other key areas.
  • The AICPA strongly believes in preserving the cash basis method of accounting and has many resources in support of this position.
The AICPA is committed to being your home for all guidance and resources related to tax reform. Below are a variety of resources, such as webcast archives, podcasts, and other tools to keep you informed.


Videos, Webcasts, and Other Media

Other Resources

  • How the Election May Affect Taxation of Business Income: This report summarizes recent proposals, including the House Republican's Tax Reform Task Force Blueprint, the Trump Tax Plan, and the reported (but not yet released) Hatch Integration Plan, to reform the U.S. business income tax system and considers the path to enactment of any such legislation.
Take advantage of the latest learning opportunities, including conferences, webcasts, and other CPE opportunities. As areas emerge, you can entrust the AICPA to sponsor superior events to help you remain the premier providers of tax services.




Washington Tax Brief
[Webcast series]

This webcast series will keep you informed on what is going on in Washington that may affect you, your practice, and/or your clients. AICPA staff will provide updates on major tax-related advocacy initiatives as well as answer participants' questions.

These events are free for everyone (no CPE is available).

AICPA ENGAGE
Las Vegas, NV or Virtual, June 11-14 [Conference]

AICPA’s ENGAGE is the newest, premier event that offers expanded leadership and learning opportunities to accelerate and advance your success. This one event brings together five of the AICPA’s well-known conferences with the Association for Accounting Marketing Summit for four days of fresh ideas and breakthrough presentations and workshops — all under one roof. 

 

AICPA National Tax
Washington, D.C. or Virtual, Nov. 6-7 [Conference]

This event brings leading tax practitioners and key government officials together to present differing and shared positions for a thoughtful review of potential scenarios, tax priorities, and a pulse check of the ever-changing tax landscape. 


tax reform Tax Reform Update
(registration coming soon)
Oct. 18 from 1-2pm ET [Webcast]

This one-hour webcast will get you up to speed on current activity within Congress and proposals that are under consideration. Don't miss this opportunity to get clear, easy-to-understand information about tax reform.

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