The U.S. Senate passed its reconciliation bill earlier today, which removes the limit on pass-through businesses’ state and local tax (SALT) deductions entirely, generating optimism for those affected businesses. The American Institute of CPAs (AICPA) sent a letter to Senate leadership expressing its strong support of tax-related provisions included in the latest version of the One Big Beautiful Bill Act (OBBB) passed by the Senate. Additionally, the AICPA is urging members of the House of Representatives to join their Senate counterparts in preserving this important deduction.
The Senate bill retains the ability of all pass-through entities (PTEs) to continue to deduct state and local taxes (SALT) at the entity level, preserving parity between corporations and pass-through entities and allowing PTEs to take the deductions as intended. This comes after weeks of advocacy by the AICPA and other stakeholders. This crucial deduction ensures that businesses around the country that significantly contribute to job growth can continue to support the economy and thrive.
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“We appreciate the challenges that come with drafting a budget reconciliation bill that permanently extends tax provisions, enhances tax administrability and balances the interests of individual taxpayers and business taxpayers,” the AICPA stated in its letter.
The AICPA outlined several other provisions included in the bill which it strongly supports, including:
- Expanding the use of section 529 accounts for costs associated with obtaining a post-secondary credential and increasing the contribution limit.
- Repealing the American Rescue Plan Act’s lowered threshold for Form 1099-K to $600 for an unlimited number of transactions
- Increasing the filing threshold for Forms 1099-NEC and Forms 1099-MISC from $600 to $2,000, adjusted for inflation.
- Making permanent the section 174 deduction for research and experimental (R&E) expenditures.
- Restoring and making permanent section 163(j), which reinstates the earnings before interest, taxes, depreciation and amortization limitation.
- Making permanent 100% bonus depreciation.
- Making permanent the Section 199A qualified business income deduction and expanding its limitation phase-in range for specified service trades or businesses.
- The extension and enhancement of Paid Family and Medical Leave Tax Credit.
- Permanently extending section 954(c)(6) of look-through rule for controlled foreign corporations.
- Restoring the limitation on downward attribution of stock ownership in applying constructive ownership rules under section 958(b).
- Removing a provision that would restrict the regulation of contingency fees with respect to tax returns.
- Retain the current rules around the excess business losses limitation.
The House-passed bill and the Senate Finance Committee proposed text released on June 16, 2025, would have eliminated or greatly limited this deduction that is important to millions of job creators. As a result, the AICPA and CPA state societies expressed strong opposition to language as it would have widened existing disparities between pass-through entities (PTEs) and corporations. While the AICPA has continued concerns regarding the permanency of the Tax Cuts and Jobs Act’s limitation on casualty loss deductions, on balance, the bill passed in the Senate makes significant improvements to the OBBB passed in the House and promotes business growth.
“We are grateful to members of Congress who supported millions of businesses’ ability to retain this critical deduction,” said AICPA President & CEO, Mark Koziel, CPA, CGMA. “The AICPA and its partners across other professions and state CPA societies urge the members of the House to continue their support for these businesses to ensure they can continue to grow the economy and invest in their communities.”
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