AICPA Demonstrates Support for Tax Fairness for Small Businesses

AICPA Demonstrates Support for Tax Fairness for Small Businesses, Improving Deduction for QBI Under Section 199A

Washington, D.C. (August 25, 2021) – The American Institute of CPAs (AICPA) has long advocated for an efficient and pro-growth tax system based on principles of good tax policy. In accordance with these principles, the AICPA has submitted a letter to Senate Finance Committee and the House Ways & Means Committee leadership regarding potential modifications to the qualified business income (QBI) deduction under section 199A within the Small Business Tax Fairness Act.

Key to the AICPA’s recommendations is the support for the elimination of the distinction between specified service trades or businesses (SSTBs), such as accountants, attorneys, doctors, athletes, consultants, and entertainers whose incomes exceeded established thresholds*, and non-SSTBs, which encompasses all other businesses. The Small Business Tax Fairness Act would amend section 199A(d) by eliminating the distinction for SSTBs, allowing individuals operating all types of businesses to qualify for the lower effective tax rates provided by the QBI deduction under the Tax Cuts and Jobs Act (TCJA).

“Professional services firms, such as accounting firms, are an important sector in our economy and heavily contribute to the nation’s goals of creating jobs and better wages. They are an integral part of the voluntary tax compliance process. Without the benefit of an equitable and consistent rate reduction for all individual business owners, the incentive to start or grow a business is diminished, with a corresponding loss of jobs and reduction in wages,” explains the letter. “In the interest of equity, the AICPA urges Congress to permit all non-corporate business owners to avail themselves of the QBI deduction provided under the TCJA.”

The AICPA supports the elimination of the SSTB distinction and urges Congress to permit all non-corporate business owners to qualify for the QBI deduction.

Adhering to their Guiding Principles for Good Tax Policy, recommendations by the AICPA address the following areas:

• Support for the Elimination of the Distinction Between SSTB and Non-SSTB

• Support for Allowing Aggregated Computation for QBI

• Request to Retain the QBI Deduction for Estates and Trusts

• Request to Retain the QBI Deduction for an Electing Small Business Trust (ESBT)

• Recommendation to Simplify the Administrative Burdens of Triple Net Leases and Royalties

• Recommendation to Simplify QBI Losses

• Request to Remove the Marriage Penalty

• Recommendations on Self-Employed Deductions

BACKGROUND:

• The Tax Cuts and Jobs Act provided a 20 percent deduction to pass-through businesses, however, the 2017 law phased out the deduction for professionals such as accountants, attorneys, doctors, athletes, consultants and entertainers whose incomes exceeded thresholds of $157,500 for single taxpayers or $315,000 for married couples filing jointly.

• Other types of businesses could claim far larger deductions. Wyden’s legislation would impose a cap of $400,000 to limit how much wealthy business owners could deduct from their taxes.

Contact: Veronica Vera
202-434-9215
Veronica.Vera@aicpa-cima.com