For a few weeks now, the AICPA, together with different stakeholders that includes the NYCPA, have aired their concerns about the proposals to remove the pass-through entity tax (PTET) state and local tax (SALT) deduction for specified service trades or businesses (SSTBs).

“Overall, the AICPA appreciates the Senate Finance Committee’s efforts to improve and correct the targeting of SSTBs in the House bill, which lacked a foundation in sound tax policy. However, we remain concerned regarding the inequitable treatment of pass-through entities compared to corporations,” AICPA President & CEO, Mark Koziel noted. “While the Senate bill is less punitive to SSTBs than the House version, it would still result in a tax increase for all pass-through businesses, such as CPA firms. As we continue to analyze the bill’s language and its impact on the business community and taxpayers, we look forward to working with Congress to recommend improvements."

However, after the Senate released the reconciliation bill, the AICPA on Jun. 18 enumerated the specific provisions that it supports. The Senate bill includes these provisions that the AICPA has previously supported:

 • An rise in the standard deduction for years 2025-2028.

 • Inclusion of legislation to broaden section 529 accounts' use for costs related to getting a post-secondary credential that grants financial flexibility to those pursuing or advancing in the accounting profession. This has been a priority for the AICPA and the accounting profession.

 • Repealing the American Rescue Plan Act’s lowered threshold for Form 1099-K to $600 for an unlimited number of transactions; the reconciliation bill will reverse the requirement to a $20,000 threshold and more than 200 transactions.

 • Increase in the filing threshold for Forms 1099-NEC and Forms 1099-MISC to $2,000 from $600, adjusted for inflation.

 • Provision about section 174 research and experimental (R&E) expenditures that might now be expensed for domestic research or experimental expenditures under new section 174A and provision of transition rules for the rest of domestic R&E expenditures.

 •  Provision about extending and enhancing of Paid Family and Medical Leave Tax Credit, which would offer certainty to companies by making a temporary paid family leave tax credit permanent.

 •  Continues permanency of the qualified business income (QBI) deduction provision but broadens the QBI deduction limitation phase-in range for SSTBs to $150,000 for married couples filing jointly and $75,000 for others, increasing from $100,000 and $50,000.

 •  Retaining the Tax Cuts and Jobs Act of 2017's higher exemption amounts for the individual alternative minimum tax, simplifying filing for many taxpayers. 

 •  Provision about section 163(j) that reinstates the earnings before interest, taxes, depreciation and amortization (EBITDA) limitation.

 •  Making permanent section 954(c)(6)'s of look-thru rule for controlled foreign corporations.

 •  Restoring the limitation of “downward attribution” of stock ownership in section 958(b).

 •  Removing from Senate Bill: Restriction on regulation of contingency fees with respect to tax returns.

The organization noted that the individual rates and individual standard deductions are still the same as proposed in the One Big Beautiful Bill Act. The Child Tax Credit is also included and reflects a permanent increase to $2,200, the AICPA said. The AMT  is consistent with the House bill, with a minor change to the inflation adjustment. The bill also contains the no tax on tips proposal together with the car interest loan deduction.

The Senate bill also includes its SALT tax proposal. It is different from the House's version. The House legislation offers a $40,000 cap per individual. The Senate proposes maintaining the current $10,000 cap for individuals as a placeholder. For passthrough entities, the Senate eliminates the SSTB limitation. Owners can also deduct PTET SALT taxes the do not exceed the greater of $40,000 ($20,000 for married filing single), or 50% of PTET SALT paid.

The AICPA is looking to clarify the tax liability by the pass-through entity not exceeding the 102% individual liability limit, which the kind of taxes subject to the substitute payment provision, and the allowance of mandatory state and local taxes including franchise taxes and unincorporated business taxes, to be deducted at the pass-through entity level.

The AICPA said that the Senate bill is a step in the right direction as it no longer discriminates against SSTBs. But it does not create parity between pass-throughs and corporations. Pass-through entities include many businesses and professions including accountants, lawyers and pharmacists. They also include Main Street shops such as local restaurants and family-owned businesses.