The American Institute of CPAs (AICPA) has reiterated its stance against the proposed limitations on state and local tax (SALT) deductions for specified service trades or businesses (SSTBs) in the One Big Beautiful Bill Act.
The body sent a second letter to the Senate Finance and House Ways & Means Committees highlighting the need for modifications to the ‘troubling' tax proposals.
In the letter, the AICPA said: “We are sensitive to the challenges in drafting a budget reconciliation bill that permanently extends tax provisions, enhances tax administrability, and balances the interests of individual and business taxpayers.
“While we support portions of the legislation, we do have significant concerns regarding several provisions in the bill, including one which threatens to severely limit the deductibility of SALT by certain businesses. This outcome is contrary to the intentions of the One Big Beautiful Bill Act, which is to strengthen small businesses and enhance small business relief.”
The AICPA called for an allowance for business entities, including SSTBs, to deduct SALT paid or accrued in trade or business activities.
This move aligns with the Tax Cuts & Jobs Act's original intent and has been sanctioned by the Internal Revenue Service.
The current House version of the bill is criticised for unfairly targeting SSTBs by restricting their SALT deduction capabilities.
The AICPA also addressed the risks of contingent fee arrangements in tax preparation, suggesting they could lead to abuse.
They recommended removing an amendment that could permanently disallow business losses without offsetting business income.
The letter warned against laws that financially harm businesses and discourage professional service-based business formation.
The AICPA supported provisions in the bill, such as using section 529 plan funds for credential expenses, tax relief for natural disaster-affected individuals and businesses, and making the qualified business income deduction permanent.
They also advocated for the preservation of the cash method of accounting and increasing the Form 1099-K reporting threshold.
In addition, the AICPA endorsed permanent extensions of international tax rates and provisions that offer greater certainty and clarity.
It also shared a list of endorsed legislation, principles of good tax policy, and a compendium of proposals for simplifying and technically amending the Internal Revenue Code.
AICPA Tax Policy & Advocacy vice-president Melanie Lauridsen said: “While we are grateful to Congress for many provisions in this bill, the unfair targeting of certain types of businesses creates inefficiencies in business decision-making and could result in negative, long-lasting impacts on the economy.
