Tax Reform Update: AICPA Seeks Guidance on Section 199A

by AICPA | Feb 23, 2018

AICPA Requests Immediate Guidance from IRS and Treasury Department
On Deduction for Qualified Business Income of Pass-through Entities

  • The Treasury Department and IRS should provide clarity on the definition of the term “qualified business income” by defining what activities constitute a qualified trade or business under section 199A.
  • Taxpayers need clarity to comply with their 2018 tax obligations and to make informed decisions about cash-flow, entity structure, and other tax planning issues.

Washington, D.C. (February 21, 2018) – The American Institute of CPAs (AICPA) requested immediate guidance from the Internal Revenue Service (IRS) and U.S. Department of the Treasury on various issues regarding section 199A of the new Internal Revenue Code, the deduction for qualified business income (QBI) of pass-through entities.

“Taxpayers and practitioners need clarity regarding QBI in order to comply with their 2018 tax obligations and to make informed decisions regarding cash-flow, entity structure, and other tax planning issues,” Annette Nellen, CPA, CGMA, Esq., chair of the AICPA Tax Executive Committee, wrote in her February 21 letter.

Nellen urged the IRS and Treasury to “focus their immediate attention on six questions in need of priority guidance,” as well as the AICPA’s suggested response to the questions. 

Specifically, the letter recommended immediate guidance on the following issues:

  1. Definition of section 199A QBI
  2. Aggregation method for calculation of QBI of pass-through businesses
  3. Deductible amount of QBI for a pass-through entity with business in net loss
  4. Qualification of wages paid by an employee leasing company
  5. Application of section 199A to an owner of a fiscal year pass-through entity ending in 2018
  6. Availability of deduction for Electing Small Business Trusts (ESBTs)
The letter also included a list of other issues affecting QBI that the AICPA believes warrant guidance. 

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