AICPA Submits Recommendations on Modernizing Tax Provisions in Response to COVID-19 Pandemic

May 29, 2020

WASHINGTON, D.C. (May 7, 2020) — The coronavirus pandemic has created economic and technological changes for our nation and has spotlighted federal tax barriers the U.S. tax system creates when small businesses encounter a global risk. In response to this paradigm shift, the American Institute of CPAs (AICPA) today sent Congress a letter that identifies more than a dozen tax barriers that Congress needs to address to future-proof our tax system, bring it into the 21st century and encourage continued small business growth.

“Main street businesses are a vital part of the economy and the tax system should support, encourage, and adapt to the rapid changes in technology and small business processes that continuously push us forward. The tax system is typically ‘behind’ the current environment, perpetually catching-up. The pandemic highlighted the antiquated nature of some of these provisions and modernizing these for small businesses ensures that the system is proactive in responding to future events,” AICPA states in its letter (attached).

The letter discusses and provides recommendations on three specific areas:

  • Small Business Barriers, such as AMT for individuals, trusts and estates; limited business deduction of state and local taxes; and unreasonable application of syndicate rules.
  • Proposed Technical Corrections to the Coronavirus Aid, Relief and Economic Security (CARES) Act, such as allowing deductions for PPP expenses and allowing taxpayers to use operating losses to offset only non-GILTI income.
  • Additional Legislative Recommendations, such as providing a small business tax credit that allows them to invest in technology and provide virtual offices; repeal or significantly increase flexible spending account caps; and create a uniform rule allowing for basis-first retirement plan distributions.

“Congress has rapidly responded to the needs of small businesses in response to the COVID-19 pandemic. Long-term, strategic planning to modernize the tax system in a way that helps small businesses thrive in the future is an important step to promoting good tax policy,” said Chair of the AICPA Tax Executive Committee, Chris Hesse, CPA.  “We urge Congress to thoughtfully consider these recommendations to remove barriers that impede small businesses today and in the future, thus ensuring more consistency, fairness, and certainty in our tax code,” he continued.