AICPA Objects to Proposed Limitation on Use of Cash Method of Accounting

September 5, 2013

The American Institute of CPAs (AICPA) expressed its opposition to a proposed limitation on the use of the cash method of accounting that is contained in House Ways and Means Committee Chairman Dave Camp’s (R-Mich.) small business tax reform discussion draft.  Under the proposal, only individuals and certain taxpayers with average gross receipts of $10 million or less are eligible for the cash method.  The proposal effectively eliminates exceptions that currently exist for certain pass-through entities (i.e., partnerships and S corporations), farmers and personal service corporations to use the cash method. 

“We support the expansion of the number of taxpayers that may use the cash method of accounting.  The cash method of accounting is simpler in application, has fewer compliance costs, and does not require taxpayers to pay tax on income they have not yet received,” the AICPA explained in a letter to Camp and Ranking Member Sander Levin (D-Mich.).  “For these same reasons, we are extremely concerned with and oppose certain limitations included in the Proposal.”

The AICPA is urging the lawmakers to consider the financial burden the proposal, if enacted, would place on businesses. “The proposal would require these companies to change to the accrual method, force their owners to pay tax before they have the cash to pay it, and add to complexity and costs,” the letter stated.

The letter follows up on information the AICPA presented in its May 17, 2013 testimony for the record to the Ways and Means Committee Subcommittee on Select Revenue Measures.