AICPA Sends Congress Comments About Proposed Reforms to Subchapter K (Partnership Taxation)

Good tax policy and effective administration has been the cornerstone of advocacy for the American Institute of CPAs (AICPA) since its inception. In a letter sent to Congressional leadership from the Senate Finance Committee and the House Ways and Means Committee, the AICPA expressed strong concern regarding recent proposals to reform Subchapter K in the Pass-through Reform Discussion Draft.

These proposals target perceived and actual abuses in an effort to close the tax gap, however they do not conform to the AICPA’s principles of good tax policy objective framework and misconstrue the history regarding Subchapter K dating back to the 1954 Internal Revenue Code (IRC).

Passthrough entities, and specifically partnerships taxed under Subchapter K of the IRC, generate significant business income reported to the Internal Revenue Service (IRS). Partnerships serve as the structure for many small and newly formed businesses. The “partnership” is the ubiquitous business structure for private equity investment, personal service firms, and many start-up businesses. Good tax policy related to partnerships and effective administration of that system should provide fairness, simplicity, neutrality and certainty.