AICPA News – May 2024

AICPA and State CPA Societies Have ‘Grave Concerns’ with BOI Reporting

In a recent letter to the Department of the Treasury and the Financial Crimes Enforcement Network (FinCEN), the American Institute of CPAs (AICPA), together with 54 state CPA societies, expressed serious concerns with the rollout and push to implement FinCEN’s Beneficial Ownership Information reporting requirement without regard for the impact to the small business community.

The AICPA has submitted past letters to FinCEN and the U.S. Congress noting concerns about the constricted timeline for the small business community to understand the reporting requirement and urging caution regarding the failure to provide a reasonable timeframe for small businesses to comply with BOI for both new and existing entities. Additionally, the AICPA has raised concerns over the estimated burden hours and associated time-cost which has effectively become a 30-day tracking requirement.

The AICPA and state CPA societies are urging FinCEN to suspend all enforcement actions until one year after the conclusion of all court cases related to NSBA v. Yellen and take no retroactive enforcement actions for non-compliance during this time period.

AICPA Requests Simplification for Generation-Skipping Tax Exemption

The American Institute of CPAs (AICPA)submitted a letter to the Internal Revenue Service (IRS) requesting simplified procedures for when taxpayers either fail to make a timely election out of automatic allocation of Generation-Skipping Tax (GST) exemption or make a section 2632(c) election inadvertently. These recommendations will simplify filing for taxpayers and practitioners and will reduce the administrative burden on the IRS as well.

The GST exemption is an exemption from an estate tax imposed on beneficiaries who are two or more generations removed from a deceased individual. It is aimed at preventing someone from intentionally skipping over a generation in order to avoid certain taxes. Section 2632(c) provides for the allocation of the GST exemption.

The AICPA’s recommendations include:

• A simplified procedure for obtaining an extension of time to elect out of automatic allocation of GST exemption to indirect skips. Using the simplified method already provided under Rev. Proc. 2004-46 as a model, the Department of the Treasury and the IRS should provide a similar revenue procedure for situations in which the donor’s GST exemption is automatically allocated to a transfer, but the donor did not want GST exemption to be allocated.
• A procedure for retroactively revoking an inadvertent section 2632(c) election. Implementing a streamlined process for taxpayers to retroactively revoke inadvertent elections would benefit both taxpayers and the IRS. Taxpayers would gain peace of mind knowing they can rectify mistakes without facing undue hardship. This would reduce stress, potential penalties, and the need for complex legal challenges. The implementation of a simplified procedure would promote efficiency, reduce compliance costs, and align with broader efforts to simplify tax administration.

AICPA Provides Recommendations to Clarify the Form 990 Series

The American Institute of CPAs (AICPA)submitted a letter to the Internal Revenue Service (IRS) requesting clarification and workarounds for the 990 Series Form instructions. A broad category of exempt organizations must file returns with the IRS each year, including hospitals, private foundations, universities, churches and many others. Exempt organizations will generally file a form that is part of the Form 990 series. Among its recommendations, the AICPA has requested clarification of instructions and    the simplification, addition and re-wording of language for Forms 990, 990-PF and 990-T.

The AICPA’s recommendations include:

• The IRS should provide clarification and workarounds for the 990 Series Form instructions, as well as Publication 4163, Modernized e-File (MeF) Information for Authorized IRS e-File Providers for Business Returns, to help practitioners successfully electronically file exempt organization returns.
• In the case of a system-wide E-file outage, the IRS should alert the public via the website page “E-file for Charities and Non-Profits” or make an announcement via an alert through the IRS’ e-News for Exempt Organizations.
• The business filing superseding return function in the MeF system should be extended to exempt organizations to allow them to file superseding returns after the original-filed return has been filed, but prior to the end of the filing period (with extensions) without amending the applicable series Form 990.

The AICPA’s comments also include a matrix for the Form 990 series which focuses on specific sections and the recommendations for those sections.

AICPA Submits Recommendations Regarding Proposed Regulations on RIAs

The American Institute of CPAs (AICPA)submitted a letter to the Financial Crimes Enforcement Network (FinCEN) this week providing feedback on a proposed ruling and addressing concerns regarding the implications of the proposed regulations on Registered Investment Advisers (RIAs).

The AICPA’s letter references FINCEN-2024-0006 and RIN 1506-AB58, Anti-Money Laundering/Countering the Financing of Terrorism Program and Suspicious Activity Report Filing Requirements for Registered Investment Advisers and Exempt Reporting Advisers as proposed by FinCEN.

The proposed regulations rely on Assets Under Management (AUM) as the sole determinant for regulatory thresholds. The AICPA believes this overlooks the practical considerations of the size and capacity of RIAs, particularly smaller firms, and suggests that regulatory thresholds be evaluated based on a combination of factors.

The recommendations also cite the introduction of additional regulatory requirements imposing a significant administrative burden on small RIAs, which can be considered a duplication of efforts already performed by the RIA’s custodian.

The cumulative impact of the regulatory requirements on RIAs could cause challenges in maintaining compliance, potentially deterring new entrants and limiting competition in the industry. The AICPA has asked FinCEN to reassess the proposed regulations to ensure that there is an appropriate balance between regulatory objectives and practical realities faced by RIAs.

AICPA Backs Legislation Giving More Relief to Natural Disaster Victims

The American Institute of CPAs (AICPA) expressed its strong support of H.R. 8007, the Disaster Tax Lookback Parity Act of 2024, in a letter to Representatives George Murphy (R-NC) and Jimmy Panetta (D-CA), who are original sponsors of the bill. Taxpayers impacted by disasters typically do not have the benefit of the lookback period for claiming credits and refunds being aligned with a postponed return filing due date, which this legislation would provide for all federally declared disasters.

The legislation provides relief similar torecommendationspreviously submitted to Congress by the AICPA, as well as recommendations outlined in the National Taxpayer Advocate’s recent Annual Report to Congress requesting a modification of the lookback period for allowing tax credits or refunds.

When taxpayers are affected by a major disaster such as a wildfire, flood, earthquake, or hurricane, the Internal Revenue Service (IRS) often provides relief in the form of extended filing and payment deadlines. However, this relief typically does not extend the cutoff for refund or credit claims, which is still based on the original filing deadline. As a result, under current law, taxpayers affected by a major disaster often have less time to make a refund or credit claim than those who are not affected.