AICPA Says Congress Must End Tax Uncertainty; Business Planning and Administration of Tax Law at Risk

WASHINGTON--(BUSINESS WIRE)--Jeffrey A. Porter, vice chair of the American Institute of CPAs’ Tax Executive Committee, today told a House Congressional panel that Congress must reach agreement as soon as possible about expiring tax provisions because the current tax uncertainty is hindering business planning by small business owners and threatening smooth administration of tax laws.

“For example, it is nearly impossible to estimate the true cost of a purchase of new equipment when income tax rates are uncertain. Although income taxes are not the only factor in making business decisions, prudent business owners want to understand the tax consequences of a transaction.”

“Our members are receiving inquiries from their clients, sometimes on a daily basis, on whether the ‘Bush Tax Cuts’ will be extended, what will happen with estate taxes, how the ‘Tax Cliff’ will affect their businesses and whether a particular tax incentive will be extended another year,” Porter testified to members of the House Small Business Subcommittee on Economic Growth, Tax and Capital Access at a hearing titled Adding to Uncertainty: Small Businesses’ Perspectives on the Tax Cliff. “Any further delay will magnify the frustration of many small business owners.”

Currently, small businesses, formed as corporations, pass-through entities, or sole proprietorships, face great uncertainty with regard to income taxes in a multitude of areas, including income tax rates, long-term capital gains rates, the rate for qualified dividends, and whether, and to what extent, certain deductions and exemptions will be available.

“Regardless of whether you support or oppose an increase in income taxes, it is important to understand the significance of what is at stake,” Porter said. “For example, it is nearly impossible to estimate the true cost of a purchase of new equipment when income tax rates are uncertain. Although income taxes are not the only factor in making business decisions, prudent business owners want to understand the tax consequences of a transaction.”

“I also strongly urge you to not underestimate the effect that the ‘Tax Cliff’ has on tax administration itself,” Porter said. “If Congress waits until late in the year or even into next year to enact tax law changes, the IRS and commercial software vendors must scramble to revise or issue new tax forms and update software. As we experienced just a couple of years ago, this process would likely delay the initial date of when many taxpayers, including small business owners, can file their income tax returns. As a result, affected taxpayers would receive their refund checks days or perhaps weeks later than usual, which is particularly concerning for businesses operating under a tight cash flow.”

For CPAs themselves, a majority of whom are small business owners, tax uncertainty causes an increasingly compressed busy season in order to educate small business clients on the changes in the rules, advise owners on the after-tax consequences of business transactions, assist small businesses and individuals with tax and cash-flow planning and prepare income tax returns.

About the AICPA

The American Institute of Certified Public Accountants (AICPA) is the world’s largest member association representing the accounting profession, with nearly 386,000 members in 128 countries and a 125-year heritage of serving the public interest. AICPA members represent many areas of practice, including business and industry, public practice, government, education and consulting.

The AICPA sets ethical standards for the profession and U.S. auditing standards for audits of private companies, nonprofit organizations, federal, state and local governments. It develops and grades the Uniform CPA Examination and offers specialty credentials for CPAs who concentrate on personal financial planning; fraud and forensics; business valuation; and information technology. Through a joint venture with the Chartered Institute of Management Accountants (CIMA), it has established the Chartered Global Management Accountant (CGMA) designation to elevate management accounting globally.

The AICPA maintains offices in New York, Washington, DC, Durham, NC, and Ewing, NJ.

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