AICPA Offers Tax Reform Suggestions to Senate Finance Committee

The American Institute of CPAs (AICPA) submitted its recommendations for tax reform to Senate Finance Committee Chairman Orrin Hatch (R-Utah) on July 17 in response to his June 16 call for suggestions from stakeholders.

The AICPA’s recommendations cover a broad array of topics related to taxes on individuals, families and tax administration, businesses, savings and investments, and the international tax system, which are the four issue areas on which Chairman Hatch requested suggestions. The AICPA submitted a letter for each area.

Overall, the AICPA emphasized in its letters the need for a “tax system that is administrable, stimulates economic growth, has minimal compliance costs, and allows taxpayers to understand their tax obligations.” These features of a tax system are achievable, the AICPA wrote, if principles of good tax policy as outlined in the AICPA’s Guiding Principles for Good Tax Policy: A Framework for Evaluating Tax Proposals, are considered in the design of the system.

The AICPA’s key recommendations for each of Chairman Hatch’s issue areas are listed below:

Individuals, Families and Tax Administration

Simplified income tax rate structure
Education incentives
“Kiddie Tax” rules
Identity theft and tax fraud
Permanent disaster relief
Tax administration

Savings and Investments

Limit the number of employee contributory retirement plans
Eliminate the top-heavy rules
Create a uniform rule regarding the determination of investment in the contract for retirement distributions
Create a uniform attribution rule
Create a uniform definition of owners
Change the required minimum distribution rules
Create uniform rules for early withdrawal penalties
Modify the hardship withdrawal rules
Mitigate penalties related to automatic enrollment requirements

Business Income Tax

Cash method of accounting
Tax rates for pass-through entities
Distinguishing compensation income
Limitation on interest expense deduction
Definition of “compensation”
Net operating losses
Increase in expensing of startup expenditures
Alternative minimum tax repeal
Mobile workforce
Civil tax penalties
IRS deadlines related to disasters
Other business income tax issues

International Tax System

Transition to a territorial tax system for corporate business income
Develop effective anti-base erosion provisions
Retain and strengthen the subpart F provisions
Establish fair, equitable and administrable deemed repatriation procedures
Consolidate and simplify foreign information reporting requirements
Provide parity in the treatment of similar foreign and domestic tax-deferred savings accounts