- Recommendations include clarifying the effective date for net operating losses for fiscal year filers, clarifying the property class life on qualified improvement property and correcting a section concerning charitable deductions that reduces the allowed charitable deduction if assets other than cash are donated.
Washington, D.C. (February 22, 2018) – The American Institute of CPAs (AICPA) today made recommendations to the House Ways and Means Committee and Senate Finance Committee about areas of the Tax Cuts and Jobs Act (TCJA), Pub. L. No. 115-97, that require technical changes by Congress.
Among the areas identified by the AICPA are the following:
Net Operating Loss – The AICPA recommended that Congress provide a technical correction to clarify the effective date language of TCJA Sections 13302(c) and (e), and its applicability to fiscal year filers. Congress should change the statutory language to “taxable years beginning after December 31, 2017” instead of “taxable years ending after December 31, 2017,” the AICPA wrote in its letter.
“A technical correction to the wording of the effective date would provide fairness to fiscal year taxpayers that have incurred an NOL during 2017 prior to the enactment date,” the AICPA stated. “The current statutory language particularly hurts small fiscal year taxpayers that have little chance of leveling out income with large swings in their taxable income even though the 2017 calendar year taxpayers can continue using losses generated during the same time frame.”
Applicable Recovery Period of Qualified Improvement Property (QIP) – The AICPA recommended that Congress provide a technical correction to the property class life on QIP as 15 years and the inclusion of QIP as eligible property for 100% bonus depreciation.
Under the TCJA, the AICPA wrote, the statutory language for section 168(e)(3)(E) does not include QIP, leaving it as nonresidential real property (39 years modified accelerated cost recovery system (MACRS)) and not subject to bonus depreciation or some other class of property (e.g., a property with 15 years MACRS).
Charitable Contribution Deduction – The AICPA recommended that Congress provide a technical correction for section 170(b)(1)(G)(iii) as changed by TCJA Section 11023 for the 60% of adjusted gross income (AGI) charitable deduction limitation to function as intended and offered proposed language.
“The current statutory language in the TCJA reduces the allowed charitable deduction if assets other than cash are donated,” the AICPA stated. “This reduction results in a total percentage of 50%, rather than 60% of AGI. This reduction is the result even if a dollar of non-cash assets is donated (such as securities).”
The AICPA stated its recommended change “would confirm Congress’s intent was to allow for the increased 60% of AGI limitation, assuming the additional amount is in cash (for example, 30% appreciated securities and 30% cash). Currently, under the TCJA, the taxpayer can only receive the increased 60% of AGI limitation if the entire donation is in cash.”