The American Institute of CPAs (AICPA) said several areas of the Tax Cuts and Jobs Act (TCJA) need technical corrections, which it outlined in a letter to the House Ways and Means and Senate Finance committees.
Among them, AICPA recommends a technical correction to clarify the effective date language of TCJA Sections 13302(c) and (e), and its applicability to fiscal year filers. Specifically, Congress should change the wording to “taxable years beginning after December 31, 2017” instead of “taxable years ending after December 31, 2017.”
“A technical correction to the wording of the effective date would provide fairness to fiscal year taxpayers that have incurred an NOL during 2017 prior to the enactment date,” AICPA stated in its letter. “The current statutory language particularly hurts small fiscal year taxpayers that have little chance of leveling out income with large swings in their taxable income even though the 2017 calendar year taxpayers can continue using losses generated during the same time frame.”
Another suggested change relates to the Applicable Recovery Period of Qualified Improvement Property (QIP). Under the TCJA, section 168(e)(3)(E) does not include QIP, leaving it as nonresidential real property (39 years modified accelerated cost recovery system (MACRS)) and not subject to bonus depreciation or some other class of property (e.g., a property with 15 years MACRS).
There should also be an adjustment to the Charitable Contribution Deduction. Congress should make a technical correction for section 170(b)(1)(G)(iii) as changed by TCJA Section 11023 for the 60 percent of adjusted gross income (AGI) charitable deduction limitation to function as intended and offered proposed language.
“The current statutory language in the TCJA reduces the allowed charitable deduction if assets other than cash are donated,” AICPA stated. “This reduction results in a total percentage of 50 percent, rather than 60 percent of AGI. This reduction is the result even if a dollar of non-cash assets is donated (such as securities).”
This recommended change would “confirm Congress’s intent was to allow for the increased 60 percent of AGI limitation, assuming the additional amount is in cash (for example, 30 percent appreciated securities and 30 percent cash). Currently, under the TCJA, the taxpayer can only receive the increased 60 percent of AGI limitation if the entire donation is in cash.”