The House of Representatives recently passed its version of the Build Back Better reconciliation bill (H.R. 5376). As the AICPA® continues its tax advocacy efforts on behalf of the profession, here is an update of our efforts on the pending reconciliation bill. As we strive to promote good tax policy and consider the legislation's impact on the profession, proposed tax changes in various iterations of the legislation generated the AICPA’s input and written comments.
Our tax advocacy efforts began with the FY2021 budget resolution, which laid the groundwork for the reconciliation bill. Our related advocacy is expected to continue into next year as we prepare for the Treasury and IRS implementation of the Build Back Better Act. While the Senate still must prepare and pass its version of the reconciliation bill and send it back to the House for passage, we expect that a final bill will pass by the end of 2021 or possibly early into 2022. The following tax proposals and topics drew considerable AICPA input:
IRS regulation of paid tax-return preparers — The AICPA supports H.R. 4184, the Taxpayer Protection and Preparer Proficiency Act of 2021. While the relevant language on this topic was not included in the House reconciliation bill, the Senate could still choose to include a proposal that gives the IRS authority to regulate all preparers. The AICPA included recent comments on this topic in a comprehensive letter to Congress about the tax reconciliation legislation.
Qualified business income deduction improvements — The AICPA supports eliminating the specified service trade or business distinction and recommends other modifications to the section 199A deduction. The House-passed reconciliation bill does not include any changes to this deduction, and we do not anticipate that the Senate reconciliation bill will include relevant language.
Valuation issues — The AICPA raised concerns with the House Ways and Means Committee version and the Treasury Green Book proposal’s valuation issues and the treatment of gift and death transfers of appreciated property as realization events. AICPA advocacy efforts were successful as of now, and these provisions were not included in the House-passed version.
Centralized partnership audit regime technical modifications — The AICPA supports and encourages Congress to include the Treasury Green Book proposal technical modifications that provide parity to centralize partnership audit regime (CPAR) partners and non-CPAR partners in the reconciliation legislation. Unfortunately, the proposal is not included in the House-passed bill.
Penalty relief related to early sunset of the Employee Retention Credit (ERC) - The IRS issued guidance related to the early sunset of the ERC due to the enactment of the Infrastructure Investment and Jobs Act (IIJA). The guidance provides penalty relief to employers that either filed Form 7200 to claim an advance on the credit or that held back payroll tax deposits in anticipation of receiving the credit related to Q4 2021 wages. The AICPA is pleased with the guidance, which we requested through a letter to Congress.
Corporate profits (book income) minimum tax — The AICPA recommends that Congress reconsider and clarify the rules associated with the bill provision that would implement a minimum tax on corporate adjusted financial statement income.
Proposed reforms to Subchapter K partnership taxation — The AICPA expressed concerns with Chairman Wyden’s proposed Subchapter K partnership taxation changes and encouraged the Senate to follow the House by not including these changes in the reconciliation legislation.
IRS penalties procedures modifications — The AICPA opposes the proposal to modify IRS procedural requirements for assessment of penalties and urged Congress not to include this provision in the legislation. The House-passed legislation includes this provision.
Simplification recommendations — The AICPA recommends Congress consider noncontroversial technical simplification proposals to include in the tax legislation.
The AICPA will continue to advocate on these important issues as the 2021 tax reconciliation legislation proceeds in Congress, and we will continue to keep members informed of developments. Below is a reminder and links to the various iterations of the legislation and their status:
Sept. 13 — Release of the House Ways and Means Committee release (text, section-by-section summary, section-by-section summary on credits and incentives, tax provisions list, press release, Joint Committee on Taxation (JCT) section-by-section, description of revenue raisers, revenue estimate on revenue raisers, revenue estimate on credits and incentives, and distributional analysis) and passage within two days (on September 15) of the tax provisions in the reconciliation legislation
Nov. 3 — Release of the Manager’s Amendment to the Rules Committee version (comparative text, section-by-section summary, JCT revenue estimate), which was slightly updated within a day with an amendment on the state tax deduction and an amendment on other technical changes.
Nov. 18 — Congressional Budget Office release of H.R. 5376 revenue estimate cost summary, House Ways and Means Committee Title XIII budgetary effects, and estimated revenue effects of increased IRS funding not included in the cost summary.