Tax Legislation and Policy
Tax Return Due Dates
The AICPA has long been concerned about the difficulties taxpayers face when receiving delayed Schedules K-1, which are informational documents sent to owners and beneficiaries of partnerships, S-corporations and trusts. Because many of these owners and beneficiaries have due dates similar to Schedules K-1, it often is impossible for those taxpayers to file complete and timely tax returns. Rather, they are forced to file for extensions on their own tax returns.
To solve this problem, the AICPA supports requiring Schedules K-1 to be filed in advance of the owners’ and beneficiaries’ return due date. In the 112th Congress, Senator Mike Enzi (R-WY) introduced S. 845, the Tax Return Due Date Simplification and Modernization Act of 2011, a bill that generally incorporates our proposal. Also in the 112th Congress, Congresswoman Lynn Jenkins (R-KS) introduced H.R. 2382, a bill that generally incorporates our proposal and is similar to Senator Enzi’s bill. Both Senator Enzi and Congresswoman Jenkins are planning to reintroduce the bills in the 113th Congress.
Proposed Preparer Regulations
IRS Commissioner Shulman announced that the IRS would phase in a process to regulate all paid tax return preparers for the 2011 filing season. The proposal will mandate that all paid tax return preparers both register with the IRS and obtain a Preparers Tax Identification Number (PTIN), to be used in signing all tax returns and that all paid preparers be subject to Circular 230. Paid tax return preparers will be subject to an annual CPE requirement as well as an entry competency test. CPA’s are generally exempt from the latter two requirements as they have already passed a licensing examination and are subject to annual continuing professional education requirements.
Non-signing preparers who are employed by CPA firms will have to register and receive a PTIN, but will not have to take the exam or meet the IRS’s continuing education requirements. The IRS’ proposal to require fingerprinting (CPAs would be exempt) as part of a suitability check continues to be on hold while the IRS considers alternatives. The AICPA is pleased that the IRS has modified its regulations from those initially proposed and continues to work with the Service to address issues in the regulations that may adversely affect its members.
On January 18, 2013, the U.S. District Court for the District of Columbia held that the IRS lacked the statutory authority to promulgate the PTIN rules that require tax preparers to pass an exam and take continuing education courses. The court held that requiring tax preparers to register and receive a PTIN is acceptable. The IRS has announced that it intends to appeal the decision.
Effective January 1, 2010, Congress allowed the Federal Estate and Generation Skipping Tax to expire. Simultaneously the rules on step-up in basis expired and a rule requiring carryover basis for estates. However, effective January 1, 2011, the Federal Estate Tax and Generation Skipping Tax will be automatically reinstated but at their mandated rates and exemption levels as they existed in tax year 2000. The AICPA supports reinstating the Federal Estate Tax at the rates and exemption levels that were in place in 2009 until a permanent solution is found.
During the lame duck session of Congress in December 2010, a 2-year extension of the estate and gift tax was enacted. The estate tax has a $5 million exemption and a 35% rate.
Expiring Tax Provisions
Congress allowed many temporary tax provisions to expire at the end of 2009 without taking action. This list of expiring provisions includes several business and individual tax issues that are of significant concern to AICPA members and their clients as the impact of these expiring provisions will be that tax liabilities may be significantly changed. The AICPA supports Congressional action to reinstate specific issues on this list. They were extended for two years during Congress' December 2010 post-election session. A similar situation is expected to occur in 2012.
Required Disclosure of Uncertain Tax Positions
The IRS has continued forward on the required disclosure of uncertain tax positions, with modifications from its original proposal in January 2010. For tax filings beginning with 2010, disclosure of uncertain tax positions will be required by companies that have audited financial statements prepared under U.S. GAAP, IFRS, or other accounting standards, where the financial statements include a reserve for any uncertain tax positions, as well as for tax positions where a reserve has not been recorded due to an expectation to litigate. In addition, for 2010 the company must have total assets exceeding $100 million, and file Form 1120, Form 1120 L, Form 1120 PC or Form 1120 F. The IRS is phasing-in the disclosure such that by 2014 it will apply to companies with total assets exceeding $10 million. The AICPA submitted written comments to the IRS on June 1, 2010 and on December 2, 2010 regarding various aspects of the IRS proposal. The AICPA continues to discuss with the IRS its concerns with the rule.
Copy of Legislation
A copy of all noted bills and laws are available on the Library of Congress's THOMAS website.
Peter M. Kravitz
Director, Congressional and Political Affairs