Support Growing to Preserve Cash Accounting
Opposition to the mandated use of accrual accounting grew this week, as a bipartisan majority of the House of Representatives urged Congressional leaders to remove the requirement from proposed tax reform legislation.
Saying the requirement for taxpayers with $10 million or more in income to switch to accrual accounting “will have a severely detrimental impact on thousands of businesses in our districts,” 233 House legislators from both sides of the aisle signed the letter to preserve cash accounting.
“If forced to pay taxes before income is received, as would be required under the accrual method, less money would be available to small businesses for growth and job creation,” the lawmakers wrote. “Additionally, cash flow management becomes far more complex as a result, and will likely trigger the need for additional outside financing.”
A similar letter was signed by 46 Senators in August.
The American Institute of CPAs has lead the fight to keep the cash accounting option for businesses and taxpayers, which emerged in a plan from the Senate Finance Committee to overhaul the federal tax system. In the months since the initial plan was introduced, little has happened. What discussions have occurred have mostly centered around the accrual v. cash issue, with the mandate finding little support from either legislators or business.
No action is expected this year, partly because of the complexity of the issue and also because of the upcoming mid-term elections. Observers expect that tax reform will be taken up after the new Congress is seated in January. One of the drivers then is the growing clamor over so-called inversions, where big companies relocate overseas to reduce their U.S. tax burden.