AICPA makes Priority Guidance Plan recommendations to IRS

The AICPA recommended 183 changes to the IRS’s 2025–2026 Priority Guidance Plan and also encouraged the agency to continue to pursue tax simplification.

“The AICPA’s Guiding Principles of Good Tax Policy provide a framework of tax principles by which we analyze tax proposals and help promote an effective tax system based on good tax policy,” Eileen Sherr, CPA, CGMA, director–Tax Policy & Advocacy for the AICPA, said in a news release. “The comments provided in this letter support the principles of simplicity, effective tax administration, convenience of payment, and certainty, and we urge Treasury and the IRS to consider our proposals for needed guidance.”

On tax simplification, the AICPA made seven recommendations to meet that goal:

• Use the simplest approach to accomplish a policy goal.
• Provide safe-harbor alternatives.
• Offer clear and consistent definitions.
• Use horizontal drafting (a rule placed in one Internal Revenue Code section should apply in all other Code sections to the greatest extent possible).
• Build on existing business and industry-standard recordkeeping practices.
• Provide a balance between simple general rules and more complex detailed rules.
• Match a rule’s complexity to the sophistication of the targeted taxpayers.

AICPA Tax Technical Resource Panels (TRPs) brought forward the recommendations, which cover the following areas: corporations and shareholders; employee benefits; exempt organizations; individual and self-employed; international; IRS advocacy and relations; partnerships; S corporations; tax methods and periods; and trust, estate, and gift tax.

Each area’s top priorities are listed below:

Corporations and shareholders tax

Provide final guidance related to the key definitions and application of the corporate alternative minimum tax under Sec. 55, including regarding mergers-and-acquisitions issues and clarification of the definition of an applicable corporation under Sec. 59(k) and the definition of adjusted financial statement income under Sec. 56A.

Employee benefits tax

Provide a revenue procedure related to Sec. 305 of the SECURE 2.0 Act of 2022 addressing the expansion of the IRS Employee Plans Compliance Resolution System.

Exempt organizations tax

Provide an update on the potential revisions to Rev. Proc. 80-27 regarding group exemption letters as described in Notice 2020-36. Modify Rev. Proc. 80-27 to retain the group exemption letter structure where parent organizations can continue to obtain group exemption letters for their subordinate organizations while eliminating the option for the central organization to file a group return filing.

Individual and self-employed tax
 

Provide guidance on applying the state and local tax deduction cap under Sec. 164, including:

• Provide guidance on an S corporation’s inability to specially allocate items and the single-class-of-stock requirement.

• Provide guidance on Notice 2020-75 and Sec. 461 accrual-basis taxpayers.

• Provide guidance on Notice 2020-75 and Secs. 469 and 163 on nonpassive versus passive income and interest-expense tracing.

• Provide guidance on the application of Sec. 111 to state tax refunds at the individual level and ordering between passthrough entity income tax payments and nondeductible estimated payments and withholding.

International tax

Issue further guidance on the application of Secs. 959 and 961 to passthrough entities, including treatment of nonrecognition transactions.

IRS advocacy and relations

Issue regulations regarding accuracy-related penalties under Sec. 6662, Sec. 6662A, and Sec. 6664. Existing regulations contain outdated rules that misrepresent current law.

Partnership tax

Remove Regs. Sec. 1.6011-18 (basis-shifting transaction-of-interest regulations) from the income tax regulations. The IRS said in April that it would remove these regulations but has not done so yet.

S corporation tax

Issue a revenue procedure modifying the eligibility of any currently effective automatic relief for inadvertent termination or inadvertent invalid S corporation election such that a taxpayer may rely upon multiple revenue procedures to obtain relief for multiple matters affecting S corporation status.

Tax methods and periods tax

Provide guidance under Sec. 179 for the specific types of assets that qualify as “qualified real property” under Sec. 179.

Trust, estate, and gift tax

Provide for the ability to e-file certain trust, estate, and gift tax returns, including:

• Form 706, United States Estate (and Generation-Skipping Transfer) Tax Return.
• Form 706-NA, United States Estate (and Generation-Skipping Transfer) Tax Return — Estate of Nonresident Not a Citizen of the United States.
• Form 709, United States Gift (and Generation-Skipping Transfer) Tax Return.

Make it possible to electronically pay estate, gift, and generation-skipping transfer taxes.

— To comment on this article or to suggest an idea for another article, contact Martha Waggoner at Martha.Waggoner@aicpa-cima.com.