A bipartisan majority of the U.S. House of Representatives – 233 members – recently signed a letter urging the House leadership to preserve the cash method of accounting for tax purposes, writing that proposals requiring a transition to the accrual method “will have a severely detrimental impact on thousands of businesses in our districts.”
In August, a similar Senate effort gained the backing of 46 members of that chamber.
The House effort was led by Representatives Brad Schneider (D-Ill.), Richard Hudson (R-N.C.), Mike Quigley (D-Ill.) and Blaine Luetkemeyer (R-Mo.).
“Those who use the cash method of accounting include many of our local job creators and professionals including accountants, architects, attorneys, dentists, engineers, farmers, physicians and financial service professionals,” the legislators explained in a September 11 letter to Speaker John Boehner (R-Ohio) and other members of the House leadership. “Importantly, the cash method of accounting is the foundation upon which these businesses have built their business models for decades.”
The American Institute of CPAs (AICPA) is a leading opponent of recent congressional efforts to limit the use of cash accounting by pass-through entities, personal services corporations, and individuals who exceed $10 million in annual gross receipts. Under current law, these taxpayers are generally permitted to use the cash method of accounting without a gross receipts test. The AICPA partnered with state CPA societies and CPA firms to help secure the support and signatures of lawmakers on both sides of Capitol Hill.
“While we believe reforms to the tax code should provide a simpler and fairer tax system, requiring the use of the accrual method for entities currently using the cash method will not achieve these goals,” the House letter concluded. “As we seek to best represent the concerns of the constituents in our districts, we strongly urge you to preserve the cash method of accounting.”
The House and Senate efforts signal solid bipartisan opposition to retention of an accrual accounting mandate in either chamber’s tax reform proposals.
“Colleagues from state CPA societies and our members have been instrumental in this effort,” said AICPA President and CEO Barry C. Melancon, CPA, CGMA. “Thanks to them, more than half of the House and nearly half of the Senate – from both parties and every state – have voiced their opposition to a proposal that unfairly penalizes CPA firms, among other businesses. The accrual accounting mandate is bad tax policy that should be abandoned by the House and Senate.”
For more information about the issue and the AICPA's efforts, see the topic page on the AICPA website.