AICPA Sends Tax Reform Recommendations to Senate Finance Committee Chairman Hatch

AICPA Sends Tax Reform Recommendations to Senate Finance Committee Chairman Hatch

July 18, 2017

The American Institute of CPAs (AICPA) submitted tax reform recommendations 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