The AICPA has sent a list of 61 proposals for changes to the Internal Revenue Code to Congress, starting with a proposal that the definitions of terms be standardized so that words have the same meaning throughout the Code.
The 2023 AICPA Compendium of Tax Legislative Proposals — Simplification and Technical Proposals "includes items focused on improving tax administration, making the tax code fairer, and effectively promoting important policy objectives," says the Feb. 7 letter signed by Jan Lewis, CPA, chair of the AICPA Tax Executive Committee. "It is not a comprehensive list of all provisions that Congress should add back or remove from the reformed Code. We intend to continue our efforts in this area and make further recommendations in the future."
The compendium opens with a proposal to standardize definitions to avoid multiple meanings for terms such as "small business," which is defined in numerous ways in the Code, including businesses as having $10 million or less in gross receipts for the Sec. 263A small retailer exception; $25 million or less in gross receipts for the Sec. 448 small business exception; and having total assets of $50 million or less for the Sec. 1202 gain exclusion for qualified small business stock.
The AICPA makes the following recommendation in the proposal regarding terms: "Find existing terms in the Code that have multiple definitions. If there is no reason for different definitions, standardize the definition. Consider if transitional relief is needed along with the change. If there is a reason justifying the different definitions, change the name of one of the terms to avoid confusion. In crafting legislation, consider use of existing terms rather than creating new definitions."
Other highlights are proposals to:
Amend Sec. 62(a)(1) to permit the deduction of all state and local taxes, including income, sales, and property taxes, derived from or attributable to any trade or business to be deductible under Sec. 62(a)(1).
The recommendation in the proposal states: "Congress should allow owners of passthrough entities (including sole proprietors) to take an 'above-the-line' deduction for state and local taxes attributable to carrying on a trade or business, whether paid at the entity level or directly by the partner/owner. The calculation done to determine the attributable and therefore deductible amount would be done in a manner similar to calculations presently done under [Sec.] 111 to determine the amount of a state tax refund that is excludable from income or taxable."
Provide permanent and uniform provisions to aid taxpayers in disaster relief situations.
Under this proposal, 11 permanent tax provisions are recommended, including one that provides permanent, uniform inflation-adjusted disaster relief that takes effect immediately when individual disaster assistance is available in a disaster declaration area and one allowing an employee retention credit for specified disaster-damaged business.
The analysis in the proposal states that "It is important that all victims — regardless of where they reside, and whether they endured a hurricane, a mudslide, or other type of disaster — receive comparable relief. The rules should be consistent among the various disasters."
Harmonize and simplify education-related tax provisions.
The five recommendations for changes to the existing education provisions in this proposal include replacing the tax incentives intended to help taxpayers meet higher education expenses (the American opportunity tax credit and the lifetime learning credit) with one new or revised credit.
The analysis in this proposal states that the recommended changes are needed because "analysis and application of the education tax incentives are too cumbersome compared with the benefits received" for many taxpayers.
The compendium was sent to Sen. Ron Wyden, D-Ore., chairman of the Senate Committee on Finance; Rep. Jason Smith, R-Mo., chairman of the House Committee on Ways & Means; Sen. Mike Crapo, R-Idaho, ranking member, Senate Committee on Finance; and Rep. Richard Neal, D-Mass., ranking member, House Committee on Ways & Means.
— To comment on this article or to suggest an idea for another article, contact Martha Waggoner at Martha.Waggoner@aicpa-cima.com.