Two teams at the AICPA work closely together and with our organization's members to advocate on tax regulatory and legislative matters that affect the profession: the AICPA Tax Policy & Advocacy team and the AICPA Congressional & Political Affairs team. The year 2022 proved to be eventful for federal tax policy and kept our teams and members busy submitting over 60 comment letters to Congress, Treasury, and the IRS, relating to several major legislative bills containing tax provisions signed into law, continued IRS taxpayer and practitioner service problems, and tax administrative changes.
In collaboration with our tax advocacy partners — our key volunteers, the state CPA societies, and other professional organizations — the AICPA ensured that the profession was providing timely and valuable information to federal decision-makers on tax issues. Our work in 2022 is not over yet, as the lame-duck congressional session may still hold the potential for a year-end tax bill.
In the meantime, however, we look back at highlights of the AICPA's tax advocacy activities so far this year.
Testifying before the Senate Finance Committee on tax filing season issues
In February 2022, the Senate Finance Committee invited AICPA Tax Executive Committee (TEC) Chair Jan Lewis to testify before it at a hearing that spotlighted IRS customer service challenges. Since the start of the COVID-19 pandemic, many of our members (and most Americans) have believed "taxpayer service" at the IRS has not happened much. While less-than-adequate taxpayer service from the IRS is not a new issue, it was exacerbated by pandemic challenges that led to a high backlog of unprocessed tax returns and correspondence.
For tax practitioners, the backlogs often meant that refunds and pandemic relief benefits were delayed by months (and sometimes years) — frustrating clients and forcing practitioners to plead for patience. The AICPA made improving IRS service deficiencies a major and well-publicized federal tax advocacy initiative.
Ensuring congressional action for practitioner relief
In the wake of the worst of the COVID-19 pandemic, taxpayers and their tax advisers faced IRS challenges that made it difficult to voluntarily comply with tax obligations despite making good-faith efforts to do so. The AICPA's advocacy work educating members of Congress resulted in four bipartisan and bicameral (joint House and Senate) letters from legislators to the IRS and Treasury on the need for penalty relief, reductions to the tax return and correspondence backlogs, and a pause to taxpayer notices. Our ability to bring congressional pressure to bear resulted in concrete actions from the Service in several areas, including:
- Paused IRS notices: The AICPA drafted, and secured congressional sponsors for, two letters to Treasury and the IRS in 2022 raising tax filing season issues and making recommendations. The letters were signed by more than 200 lawmakers, resulting in Treasury's decision to pause many automated notices to taxpayers and exempt organizations, including ones related to collection activities.
- Late-filing penalty relief: By leveraging proposed congressional legislation (H.R. 5155, the Taxpayer Penalty Protection Act of 2021) and congressional letters, as well as many letters and meetings with Treasury and IRS, the AICPA successfully advocated in 2022 for the IRS to provide COVID-19-related penalty relief for late filers for 2019 and 2020 by issuing Notice 2022-36. The AICPA also continued to advocate for an extended deadline and expanded the scope of relief.
- Aggressive ERC mills: In multiple discussions with the IRS and members of Congress, the AICPA educated key officials on problems for CPAs and their clients with regard to employee retention credit (ERC) "mills," or generators of improper credit claims, that resulted in the IRS's providing a warning about the practice.
Advocating for taxpayer relief in the wake of natural disasters
The nation regularly experiences a devastating variety of natural disasters such as hurricanes, floods, tornadoes, and wildfires at all times of the year, but the current system does not provide fair and reliable tax assistance for disaster victims in the aftermath. The AICPA tax and congressional advocacy teams and our members helped turn a long-standing AICPA policy recommendation on disaster relief into bipartisan and bicameral legislation (H.R. 6241/S. 2583, the proposed Disaster Retirement Savings Act) that was subsequently modified and included in the Senate Finance Committee's retirement package (S. 4808, the Enhancing American Retirement Now Act).
This provision would allow individuals affected by natural disasters to withdraw up to $22,000 from qualified retirement accounts without being assessed early-withdrawal penalties and fees. Allowing natural disaster victims to tap into their own funds to cover unexpected and emergency costs associated with these disasters would remove an unnecessary burden while they wait for government assistance and insurance reimbursements that may not be immediately forthcoming. This tax relief would be automatically triggered if the president issues a federal disaster declaration. We are hopeful that this language will be included in a 2022 year-end bill.
Advocating with the IRS and Treasury on technical matters
In 2022, the TEC and members of the AICPA IRS Advocacy & Relations Committee, along with various AICPA technical resource panels, were engaged in many tax policy and advocacy efforts, drafting and submitting many comments, and meeting and discussing important issues with congressional, Treasury, and IRS officials, on numerous topics including:
- Schedule K-2/K-3 filing relief: The AICPA submitted comments (Feb. 18, 2022, Feb. 24, 2022 (with state CPA societies), Aug. 31, 2022, and Nov. 30, 2022) and held several discussions with IRS officials, resulting in the IRS's:
- Providing some penalty relief for 2021 returns;
- Exempting certain domestic partnerships for 2021 tax years from the Schedule K-2/K-3 filing requirements;
- Revising the draft instructions for 2022 tax years;
- Changing from a Jan. 15 notification requirement date to the date of Schedule K-1 to the partner and as an attachment to Schedule K-1; and
- Changing the one-month requirement from the due date, not including extensions, to the date the return is filed, including extensions.
- SECURE Act proposed regulations: The AICPA submitted pre-release comments that resulted in two requested provisions being included in the proposed regulations under the Setting Every Community Up for Retirement Enhancement (SECURE) Act, P.L. 116-94: (1) clarity on the age of majority and (2) definitions and provisions related to see-through trusts, conduit trusts, and accumulation trusts. Also, the IRS provided transition relief for 2020 and 2021 required minimum distributions, as the AICPA had suggested in its June 14, 2022, and July 1, 2022, comments on the proposed regulations.
- IRS Appeals to provide manager information: During several meetings, the AICPA raised concerns and requested that taxpayers and their representatives be provided contact information of IRS Appeals managers and the choice of how to meet with an IRS Appeals officer (e.g., telephone, video, or in person). As the AICPA requested, the IRS changed its policy to provide this information in the initial contact letter.
- R&D credit claim period extended: After AICPA letters (April 14, 2022, and Sept. 21, 2022) and discussions with IRS officials, the IRS announced that it is extending for another year (through Jan. 10, 2024) the transition period during which taxpayers are provided 45 days to perfect a research credit claim, to help in complying with the credit's new information requirements.
Looking ahead to 2023, the AICPA's tax and congressional advocacy teams, working closely with AICPA members, will continue to advocate on important tax regulatory and legislative matters. These include the implementation of enacted legislation, such as the corporate alternative minimum tax and energy tax credits, as well as proposed tax legislation, regulations, and guidance. Our efforts will also extend to tax administrative issues, such as taxpayer service. We will continue to keep members informed of issues, developments, and our further tax advocacy efforts.
— Eileen Reichenberg Sherr, CPA, CGMA, MT, is director–Tax Policy & Advocacy, and Lauren Pfingstag Vahey is director–Congressional & Political Affairs, with AICPA & CIMA, together as the Association of International Certified Professional Accountants. To comment on this article or to suggest an idea for another article, contact Paul Bonner at Paul.Bonner@aicpa-cima.com.