The AICPA on Thursday made a broad range of legislative recommendations to encourage economic recovery in the wake of the COVID-19 pandemic. In a letter from Christopher Hesse, CPA, chair of the AICPA Tax Executive Committee, to the chairs and ranking members of Congress’s tax-writing committees, the AICPA says the pandemic has “highlighted the antiquated nature” of certain tax provisions and it calls for modernizing and future-proofing the tax system, particularly with regard to small businesses.
The letter identifies barriers the tax system creates when small businesses encounter a global risk, as well as recommending technical corrections to the Coronavirus Aid, Relief, and Economic Security (CARES) Act, P.L. 116-136, and identifying other legislative fixes to the Code.
Among the general small business recommendations are a repeal of the alternative minimum tax (AMT) for individuals, trusts, and estates; allowing the deduction of all state and local taxes (SALT) associated with business income when computing businesses’ adjusted gross income, to remove the disparate effect of the $10,000 SALT deduction cap on small businesses; repealing the syndicate rules; removing the strict business-use requirement for the home office deduction; and repealing the specified trade or business rules under Sec. 199A, among many others.
The letter also proposes technical corrections to the CARES Act, including allowing deductions for expenses paid with amounts from loans forgiven under the Paycheck Protection Program (PPP); requiring amounts repaid by certain PPP borrowers on or before the May 14, 2020, safe-harbor deadline to be recycled into the PPP for reuse; and providing an exception to the Sec. 52 aggregation rules to allow companies that do not receive PPP loans but are related to companies that do receive PPP loans to still claim the CARES Act’s employee retention credit.
In addition, the AICPA recommends creating a tax credit to encourage small businesses to invest in technology and provide virtual offices; repealing the flexible spending account caps; changing the due dates for estimated taxes; increasing the individual capital loss limitation from $3,000 to $13,000, indexed for inflation; allowing individuals to deduct unreimbursed business expenses above the line; and creating uniform rules for early-withdrawal penalties from IRAs and qualified plans.
The letter notes that the current tax system is “typically ‘behind’ the current environment, perpetually catching up.” The AICPA believes its recommendations will help promote good tax policy while helping small businesses in the current economic situation and in the future.
For more news and reporting on the coronavirus and how CPAs can handle challenges related to the pandemic, visit the JofA’s coronavirus resources page.
For tax-related resources, visit the AICPA’s Coronavirus (COVID-19) Tax Resources page.
— Alistair M. Nevius, J.D., (Alistair.Nevius@aicpa-cima.com) is The Tax Adviser’s editor in chief.