The key tax provisions of the Senate infrastructure bill

The Senate recently passed a $1 trillion infrastructure bill, which includes several tax provisions being monitored by the AICPA. Ed Karl, CPA, CGMA, the AICPA’s vice president–Tax Policy & Advocacy, details several provisions in recently proposed legislation that would affect CPAs.

Also, the episode mentions recent coverage in the Journal of Accountancy on updated single audit guidance included in the Office of Management and Budget’s 2021 Compliance Supplement. And it tries to answer a question posed in a recent CPA Insider article: Will sweatpants come to the office when we return?

What you’ll learn from this episode:

• An overview of the status of the Senate infrastructure bill and its budget resolution.
• Why a part of the infrastructure bill related to cryptoasset reporting is cause for “concern.”
• The transaction reporting threshold that Karl calls “ridiculously low.”
• A potential timeline for turning the $3.5 trillion budget resolution into legislation.
• More on recent JofA coverage on single audit guidance and what the dress code might be in a return to the office.

Play the episode below or read the edited transcript:

To comment on this episode or to suggest an idea for another episode, contact Neil Amato, a JofA senior editor, at Neil.Amato@aicpa-cima.com.

Transcript:

Neil Amato: Welcome back to the Journal of Accountancy podcast. This is senior editor Neil Amato. On today’s episode, we focus on the federal infrastructure bill and budget reconciliation bill and what they could mean for accountants. That’s coming up after a word from our sponsor.

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Amato: Joining me as a repeat guest is Ed Karl, the AICPA’s vice president of Tax Policy & Advocacy. Ed, first, what is the status of the infrastructure bill now in Washington, the Infrastructure, Investment and Jobs Act, as of this recording on the afternoon of Aug. 17?

Ed Karl: Hi, thanks for having me again. It really for us is almost an annual rite of passage, where we go through this process, but in short, the infrastructure bill passed Aug. 10 in the Senate. It still needs to be addressed in the House. There are other pieces of the legislative process going on, so this infrastructure bill interestingly is one of the few pieces of legislation where you see bipartisan effort to come together. You mentioned the name. The Infrastructure Investment and Jobs Act, H.R. 3684, passed by vote of 69-30 — 69 votes for a bill in the Senate is pretty extraordinary, where you normally need 60 votes. And so 69 pass that one-trillion-dollar transportation and broadband and pipe refurbishment for water and other utilities. And it’s quite extraordinary that that bill passed last week.

Amato: In that infrastructure bill, there is a requirement for cryptoasset brokers to report transactions to the IRS, which I guess has many in the cryptoasset industry upset. What do you think about that provision?

Karl: We, we’ve been quite active in the tax aspects of, or taxation of cryptocurrency. We’ve had a task force for a number of years and drafted types of guidance that we’ve asked the IRS to release. We’ve given answers to what we thought are the important questions, but in terms of cryptocurrency reporting, it appears as if the definition of a broker is overly broad, and that’s the major concern. The cryptocurrency industry is quite active in lobbying this position, this issue. We’re staying very close to it. It is a concern to us. Sen. Rob Portman from Ohio, who introduced the amendment that got into the bill, and he was one of 10 senators who came up with the bipartisan compromise for infrastructure. His amendment got in the bill. He did, as we understand, issue a floor statement indicating that the intent is that the definition of broker would be very narrow and not incorporate a lot of the brokers who should not be incorporated into that. But it’s still a concern for many people.

Amato: As Washington keeps busy with infrastructure and a potential budget reconciliation bill, what other issues are you following that will affect our members?

Karl: We’re looking at a good handful of issues. There was something that was in play in the Senate. It seems as if it had dropped. It’s a financial information reporting requirement by banks to IRS. It’s somewhat like a 1099 reporting requirement of transactions in banks that has a, I’ll say, ridiculously low threshold of $600, and it’s a great concern. Our tax executive committee is discussing that issue, but there is a deep concern about that provision. It dropped out of the Senate infrastructure bill, but it still could be in play in the House. It could be in play in the budget resolution, because it would have a positive score, and there is a lot of concern about the cost of the budget resolution and reconciliation bill. So that item is still in play, and it’s a deep concern for us.

You asked about “what other things.” We’re looking at some disaster legislation. We’re trying to revise some of the rules for which the IRS is allowed to extend the due dates of tax returns when there is a disaster situation. And we’ve been working on a bill that would give a little bit more certainty to taxpayers and of course to their CPA advisers when there’s a looming disaster. So that’s something important to us.

Of course, the big issue that we always hear from CPAs about, IRS services or the lack thereof and the problems that they’re having. So we’re quite busy looking at that and looking at a potential bill that won’t eliminate all the problems but will help mitigate some of the issues. And that’s our approach, is trying to minimize contacts that taxpayers and their advisers need to have with the IRS because when they need to contact the IRS, it’s virtually impossible right now.

Another area is tax preparer regulation, which is getting much closer to passage. There is a bill that we support, although it is lacking one provision dealing with marketplace confusion. So we’re working on that piece of it as we support the bigger bill.

There’s something looming. Sen. Ron Wyden, who’s chair of the finance committee, introduced a bill dealing with the QBI deduction under Sec. 199A. And there’s some good news in there and some challenges in there. They would eliminate the exclusion for certain businesses like CPA firms. But there are some other changes to it that we don’t support. So we’re taking a look at that.

And the last thing I’ll mention to you was the Treasury Green Book, which is sort of a snapshot of what the administration is interested in, has a provision dealing with valuations of assets and taxing appreciation of assets in estates earlier. And it’s somewhat of a problem. So we’re taking a real close look at that and developing a comment letter. Right now, it’s not in any legislation, but we’re so concerned about it, we’re starting early on finishing up our positions on it.

Amato: That’s good information to close. Remind people, what’s the timeline for some of this legislation that we’ve discussed with?

Karl: Yeah, so we talked about the infrastructure bill that passed Aug. 10. The next day, a budget resolution passed in the Senate as well, Aug. 11. That’s a $3.5 trillion budget resolution. What the resolution is, is a big snapshot. It’s not legislation. It’s basically saying that the outside parameters of crafting a budget for the fiscal year that begins Oct. 1 for the government would be at the big picture of $3.5 trillion.

That needs to translate into actual legislative language. As is allowed under the Senate rules, budget and tax bills once a year can be passed by a 50% majority, whereas everything else has to have that 60-vote minimum. As we mentioned, the infrastructure bill vote was 69–30, the budget resolution passed 50–49 on strict party lines.

Congress is out on recess. We understand that the House will come back to take up the budget resolution next week. It still would have to be signed into law by the president. Again, it’s the big picture. And then both houses will come back in September to start crafting the actual budget reconciliation package. That will be a lot more difficult to accomplish because, as I mentioned, the budget resolution passed on a strict party line, 50–49. There are some moderate Democrats who may not like what’s in the actual legislation. So that will be another story. So this is a saga that will last, I suspect, until towards the end of the year. Then the real challenge will be, if legislation passes, we start getting into a filing season, we start getting into the need for regulations and guidance, so we’re back into sort of a similar picture that we’ve been in for the last several years.

Amato: Again, that was Ed Karl. Thanks to Ed for his time on that legislative topic.

In other news, the Office of Management and Budget released the 2021 Compliance Supplement that helps to clarify federal requirements for single audits. Some questions remain, however, and the OMB is expected to issue more guidance in the form of two addenda in the future. Read Ken Tysiac’s article on Journalofaccountancy.com for more details on that. We’ll also link to that article in our show notes.

And finally, an article in our CPA Insider newsletter, which is also linked on the JofA site, asks this question: Will sweatpants come to the office when we return? It’s a good question, and the answer is probably “no” for in-office work, but it’s nonetheless an interesting topic, as some of us have gotten quite cozy in our comfortable sweaters and other athleisure. Read freelancer Teri Saylor’s article, which we will link to in the show notes for this episode.

Thanks for listening to the Journal of Accountancy podcast.