The American Institute of CPAs (AICPA) has asked legislators to address technical corrections needed in the new Tax Cuts and Jobs Act (TCJA).
The AICPA seeks corrections to clarify the effective date for net operating losses for fiscal year filers and the property class life on qualified improvement property, and correcting a section on charitable deductions that reduces the allowed deduction if assets other than cash are donated.
Here are brief details about the corrections. Further information is in the above link in the AICPA’s letter to legislators.
Net Operating Loss (in TCJA Section 13302). The AICPA recommends that the statutory language be changed from “taxable years ending after Dec. 31, 2017” to “taxable years beginning after Dec. 31, 2017.” The law’s current language provides that changes to net operating loss carry-forwards and carry-backs are effective for tax years “ending after Dec. 31, 2017.” But the conference committee provided an effective date for tax years “beginning after Dec. 31, 2017.” The law’s language captures fiscal year taxpayers and prevents the carry-back of losses for a full 2017 fiscal tax year. But the language allows the loss carry-backs for a full 2017 tax year for calendar-year filers. “The current language hurts small fiscal-year taxpayers that have little change of leveling out income with swings in their taxable income even though the 2017 calendar-year taxpayers can continue using losses generated during the same time frame,” the AICPA states.
Applicable Recovery Period of Qualified Improvement Property (QIP) (in TCJA Section 13204). The AICPA seeks to change the property class life on QIP to 15 years and to include QIP as eligible property for 100 percent bonus depreciation, as per what the conference committee deemed. The law, however, doesn’t include QIP, which leaves it as non-residential real property and not subject to bonus depreciation or some other class of property.
Charitable Contribution Deduction (in TCJA Section 11023). The AICPA wants to replace the statutory language with the following: “Notwithstanding subparagraphs (A)-(F), a taxpayer may deduct a cash contribution to an organization described in subparagraph A up to 10 percent of their adjusted gross income in addition to any amount allowed in the current year (or under a carryover) under this subsection. Any amount contributed to an organization under this paragraph in excess of the 10 percent described in the preceding sentence shall be treated as a carryover paid in each of the 5 (sic) succeeding years in order of time.”
Miscellaneous Corrections. The AICPA seeks corrections under TCJA Sections 11001, 13543 and 14103.
Terry Sheridan is an award-winning journalist who has covered real estate, mortgage finance, health care, insurance, personal finance, and accounting and taxation issues for newspapers, magazines, and websites. A Chicago native and former South Florida resident, she now lives in New England.