This year, the AICPA’s tax advocacy efforts were focused on helping the profession and taxpayers in various areas of tax administration and tax policy. As the coronavirus pandemic gripped the world, the AICPA focused on issues that benefited tax practitioners and taxpayers, while advancing the profession as a whole.
Tax administrative filing, payment, penalty, and e-signature relief during COVID-19 pandemic:
- In addition to successfully advocating for moving the April 15 and other tax filing and payment deadlines to July 15, the AICPA also effectively urged the IRS to provide e-signature relief on key forms through the end of 2020 and served as a resource to state CPA societies as they worked with their state tax authorities. As the AICPA requested, the IRS recently extended e-signature relief on collections-related issues and on various 2020 forms until June 30, 2021.
- The AICPA informed the IRS of the extent of the impact, implications, and need for relief of the Sept. 15 e-filing outage experienced by some practitioners, successfully encouraging the IRS to issue a clarifying statement explaining timely filing relief for returns filed by Sept. 17 and providing immediate guidance to practitioners.
- The AICPA helped to facilitate state-level relief by sharing recommendations with CPA societies to assist their strong advocacy with state tax authorities for tax filing and payment deadline extension, e-signature relief, and tax penalty relief.
COVID-19 federal relief programs and small business recovery efforts:
- At the request of key congressional committee staff, the AICPA offered dozens of ideas and proposals for federal relief legislative options for large and small businesses.
- Since the IRS issued Notice 2020-32 on the tax treatment of Paycheck Protection Program (PPP) expenses and forgiveness, the AICPA has continued to push for PPP expense deductibility. Earlier this month, the AICPA, and all 54 state and territorial societies, and more than 560 national and local business organizations urged Congress to immediately pass PPP expense forgiveness legislation. The AICPA also raised the profile for the need for Sec. 501(c)(6) entity inclusion in the PPP, including collaborating with state CPA societies to write to congressional delegations. PPP expense deductibility was included in the $900 billion COVID-19 relief bill passed on Dec. 21, 2020, which was signed into law on Dec. 27 by President Donald Trump.
- Through letters and discussions with the IRS, Treasury, and the U.S. Small Business Administration, the AICPA developed relationships with government officials that resulted in successfully urging the issuance of guidance on the employee retention credit, sick leave and medical leave credits, and PPP loan forgiveness.
- The IRS also provided installment payment relief for COVID-19 as requested in the AICPA’s July letter on penalties, and in News Release IR-2020-248, the IRS made it easier to set up payment agreements and offered other relief to taxpayers struggling with tax debts.
Tax Cuts and Jobs Act (TCJA) implementation:
- The AICPA submitted TCJA-related recommendations on proposed regulations on unrelated business taxable income (UBTI) siloing — the new rule that loss from one trade or business of an exempt organization cannot offset income from a separate trade or business. The final regulations include adopting a high-level North American Industry Classification System (NAICS) 2-digit code system, which is in line with the recommendation that the AICPA had put forth, allowing taxpayers to use the highest level of aggregation. The final regulations also remove the restriction on changing NAICS codes if there is a change in the identification of a separate trade or business, which was also recommended by the AICPA. In addition, the AICPA submitted recommendations supporting the intention that an exempt organization’s investment activities should be treated as a single trade or business, which were also reflected in the final regulations.
- The AICPA provided foreign-derived intangible income (FDII) recommendations that were reflected in the final regulations. The Sec. 250 regulations released in July 2020 discuss situations in which individuals may make a Sec. 962 election on an amended return.
- AICPA recommendations on the college endowment excise tax were included in the final regulations, which exclude student loan interest income and rental income from the definition of gross investment income and remove the proposed substantiation rule while eliminating the need to determine a step-up in a partner’s share of bases in partnership assets.
- AICPA recommendations (from June 2020 and October 2018) on a beneficiary’s excess deductions on termination of a trust or estate were included in the proposed and final regulations as well. The regulations allow Sec. 67(e) expenses that are deductible in computing the adjusted gross income (AGI) of the trust or estate to also be deductible in computing the AGI of the beneficiary who succeeds to the property of the trust or estate, and the regulations clarify the effective date, stating that Sec. 67(g) applies to tax years beginning after Dec. 31, 2017, and therefore does not apply to an estate or trust’s tax year beginning before that date.
- Treasury and the IRS adopted the AICPA recommendations on meals and entertainment expenses in the final regulations that allow the 50% meals deduction if there is a separate invoice from the disallowed deduction for entertainment.
Partnership audits: The AICPA worked with state CPA societies in the successful enactment of partnership audits legislation generally following the Multistate Tax Commission (MTC) model statute in 2020 in four states (Iowa, Kentucky, Missouri, and Virginia), joining five other states that previously enacted it (California, Georgia, Ohio, Oregon, and West Virginia).
Tax capital reporting: The IRS thanked the AICPA for its serious and thoughtful comments, and the IRS’s 2020 Form 1065, U.S. Return of Partnership Income, draft instructions reflected the AICPA’s recommendations on the new tax capital reporting requirement in response to IRS Notice 2020-43. The 2020 draft Form 1065 instructions require the transactional approach for the tax-basis method to compute opening balances.
Charitable contributions language removed from qualified business income (QBI) calculation: In a comment letter to the IRS, the AICPA stated that charitable contributions to Sec. 170(c) organizations are not business expenses under Sec. 162 and don’t reduce QBI. In early October, the IRS followed the AICPA’s recommendation and published draft instructions for the 2020 Form 8995, Qualified Business Income Deduction Simplified Calculation, with a paragraph explaining how to determine QBI that no longer contains the reference to charitable contributions.
In other advocacy news:
Supreme Court brief includes mention of AICPA’s state tax guidance chart: In the defendant’s Supreme Court brief in the case of New Hampshire v. Massachusetts, the AICPA’s state tax guidance chart is cited as a reference, “See American Institute of CPAs, State Tax Filing Guidance for Coronavirus Pandemic (last updated Dec. 7, 2020), tinyurl.com/sz2e5rw (collecting States’ COVID-19 tax measures by date).”
—Nekose Wills is a manager–Advocacy Communications for the Association of International Certified Professional Accountants. To comment on this article or to suggest an idea for another article, contact Ken Tysiac (Kenneth.Tysiac@aicpa-cima.com), the JofA’s editorial director.