Accounting
IAASB rolls out ISSA 5000 sustainability assurance standard
The International Auditing and Assurance Standards Board is preparing for the adoption of its International Standard on Sustainability Assurance 5000 early next year as companies look to get outside approval from auditing firms on their environmental efforts.
The IAASB
Policymakers, regulators and other standard-setting bodies in multiple jurisdictions have already indicated plans to adopt this new standard. Earlier this year the U.S. Securities and Exchange Commission recognized the IAASB’s work and standards in this area for the purpose of allowing assurance on climate disclosures, even though the SEC’s own
“ISSA 5000, which is our sustainability assurance standard, is meant to serve as a global baseline for sustainability assurance practices,” said IAASB chair Tom Seidenstein.
Once the PIOB certifies the IAASB standard, the IAASB plans to offer a range of guidance and educational materials to help people and other standard-setters with the application and implementation of ISSA 5000. So far, the IAASB has heard positive responses from standard-setters in various jurisdictions, including Australia, Canada, Brazil, Turkey and the European Union, about their intention of adopting some or all of the standard for their requirements. “That’s just the earliest stages,” said Seidenstein. “They were all waiting for us to finish the standard, and we’ll have to see how those considerations progress.”
ISSA 5000 builds on two of the IAASB’s existing standards on assurance:
“With the growing desire to have sustainability reporting throughout the world and the emergence of some of the leading reporting frameworks, we were urged to take what we had and make it specific to sustainability reporting,” said Seidenstein. “We took a pretty broad-based, principles-based framework that applied to all assurance and really focused it in, took our best practices on the assurance side, grabbed some of the key concepts that we’ve brought into the audit side, and made a sustainability-specific standard. Now what’s really important about this is it will work with all sustainability information prepared with any suitable reporting framework.”
That means it would work with not only the
The IAASB developed the standards so they could work with various frameworks. “Our standard covers any sustainability information, so that would be covered as long as the reporting framework fulfills certain criteria, then our standard will work against that,” said Seidenstein. “You’re assuring against a framework. Reporting standard-setters will set the framework.”
ISSA 5000 addresses both limited and reasonable assurance. “Most assurance engagements these days are on a limited assurance basis,” said Seidenstein, noting that both the SEC and CSRD rules require only limited assurance. But he believes investors will eventually be demanding the more stringent “reasonable assurance.”
“We wanted to have a clear pathway in our standards with a differentiation between limited and reachable assurance requirements, and ISSA 5000 provides both,” said Seidenstein.
Reasonable assurance is similar to the level of assurance offered in financial audits. “The assurance practitioner does a number of inquiries, does the risk assessment, responds to it and reduces the risk of material misstatement down to an acceptable level,” Seidenstein explained. “That’s really important, and will give a high-level degree of confidence that the sustainability reports are stated correctly. In the world of limited assurance, there’s less work done. It’s stated in a negative way, that there’s nothing that’s come to the attention of the practitioner that would lead them to believe that the statements are materially misstated. That’s really about a different type of risk assessment, different lines of inquiry, in responding to areas of risk, whereas a reasonable assurance engagement is much more robust. Most people are focused on limited right now to develop the capacity, knowledge and understanding as we then transition to reasonable assurance over time.”
However, the standards should help investors assess the reliability of a company’s sustainability reporting.
“What these standards will do, just like audit standards and just like assurance today, but in a much more specific way, will give the users of information more confidence that an external third party that’s independent and expert has reviewed the sustainability reports and can either provide a limited assurance or reasonable assurance opinion against the sustainability report, and that should give confidence,” said Seidenstein. “It’s the same thing as you would expect on the financial reporting side. It’s precisely why audits are important that you have an independent expert third party look at it to make sure that there’s no material misstatements.”
An
Auditors would follow many of the same basic approaches and methodologies in the world of financial auditing, from the planning to the conclusion to the reporting stages. “We focus very much on the planning, the risk assessment phase, the risk response phase of audits, so it’s very similar in many concepts, but translated to a sustainability context,” said Seidenstein. “What is slightly different in this world is first of all, you have much more qualitative and prospective information than you would in the financial reporting context, so you’re very focused on the process, the controls, the approach to making sure that the disclosures are materially correct.”
The IAASB wrote the standard so it can be used by both accountants and non-accountants since some other types of consulting firms that aren’t accounting firms have also been providing assurance on sustainability reporting, particularly when it comes to greenhouse gas emissions. IFAC’s
The report found the IAASB’s assurance standard, International Standard on Assurance Engagements 3000 (Revised), continues to be used most frequently. In the most recent year for which data is available (2022), 92% of firms applied ISAE 3000 (Revised) in their sustainability assurance engagements, 98% of companies reported some level of detail on sustainability, and 69% obtained assurance on at least some of their sustainability disclosures. But the mix of reporting standards used by companies remains fragmented
For ISSA 5000, non-accountant practitioners would still need to adhere to the IAASB’s quality management standards as well as the ethics standards developed by its sister standard-setting board, the International Ethics Standards Board for Accountants. IESBA has also been developing ethics standards for sustainability reporting. The International Organization of Securities Commissions has
“We’re clearly proud of this work, that we were able to turn this around in under two years’ time with robust due process, and we met the timeline particularly set forward by IOSCO in their recommendation to both us and IESBA in terms of supporting sustainability reporting requirements,” said Seidenstein.
Even though the SEC’s climate rule is on hold, he believes the standards will still be useful for U.S. accountants.
“In the United States, there are many different companies that will be seeking assurance, or already do seek assurance, on their sustainability reporting,” said Seidenstein. “So many companies have ESG reports or sustainability reports on a voluntary basis. There are a number of companies that are likely to adopt ISSB standards beyond that on a voluntary basis, or report on some other set of standards currently and are seeking assurance. There are many companies that will be required to conform with the European Corporate Sustainability Reporting Directive, and they will be required to have assurance under the CSRD and potentially be required to use our set of standards. The European Commission asked the CEAOB, which is the Committee of European Audit Oversight Boards, to advise the Commission on how to implement assurance requirements. It said specifically to look at our work on 5000 in that regard. American companies may have that requirement and could be in the value chain of companies that require sustainability reporting, whether it’s in Europe or elsewhere, and would also require assurance. There are a number of ways that our work could be relevant to American companies, irrespective of the climate rule.”
A recent
ISSA 5000 promises to be widely useful for auditing firms in providing assurance on these important metrics. “We believe that this will establish a global baseline on the assurance side to complement what’s happening on the reporting side, and you really can’t have one without the other,” said Seidenstein.
The American Institute of CPAs is asking leaders of the Senate Finance Committee and the House Ways and Means Committee to make changes in the wide-ranging tax and spending legislation that was
In a
“While we support portions of the legislation, we do have significant concerns regarding several provisions in the bill, including one which threatens to severely limit the deductibility of state and local tax (SALT) by certain businesses,” wrote AICPA Tax Executive Committee chair Cheri Freeh in the letter. “This outcome is contrary to the intentions of the One Big Beautiful Bill Act, which is to strengthen small businesses and enhance small business relief.”
The AICPA urged lawmakers to retain entity-level deductibility of state and local taxes for all pass-through entities, strike the contingency fee provision, allow excess business loss carryforwards to offset business and nonbusiness income, and retain the deductibility of state and local taxes for all pass-through entities.
The proposal goes beyond accounting firms. According to the
The AICPA argued that SSTBs would be unfairly economically disadvantaged simply by existing as a certain type of business and the parity gap among SSTBs and non-SSTBs and C corporations would widen.
Under current tax law (and before the passage of the Tax Cuts and Jobs Act of 2017), it noted, C corporations could deduct SALT in determining their federal taxable income. Prior to the TCJA, owners of PTEs (and sole proprietorships that itemized deductions) were also allowed to deduct SALT on income earned by the PTE (or sole proprietorship).
“However, the TCJA placed a limitation on the individual SALT deduction,” Freeh wrote. “In response, 36 states (of the 41 that have a state income tax) enacted or proposed various approaches to mitigate the individual SALT limitation by shifting the SALT liability on PTE income from the owner to the PTE. This approach restored parity among businesses and was approved by the IRS through Notice 2020-75, by allowing PTEs to deduct PTE taxes paid to domestic jurisdictions in computing the entity’s federal non-separately stated income or loss. Under this approved approach, the PTE tax does not count against partners’/owners’ individual federal SALT deduction limit. Rather, the PTE pays the SALT, and the partners/owners fully deduct the amount of their distributive share of the state taxes paid by the PTE for federal income tax purposes.”
The AICPA pointed out that C corporations enjoy a number of advantages, including an unlimited SALT deduction, a 21% corporate tax rate, a lower tax rate on dividends for owners, and the ability for owners to defer income.
“However, many SSTBs are restricted from organizing as a C corporation, leaving them with no option to escape the harsh results of the SSTB distinction and limiting their SALT deduction,” said the letter. “In addition, non-SSTBs are entitled to an unfettered qualified business income (QBI) deduction under Internal Revenue Code section 199A, while SSTBs are subject to harsh limitations on their ability to claim a QBI deduction.”
The AICPA also believes the bill would add significant complexity and uncertainty for all pass-through entities, which would be required to perform complex calculations and analysis to determine if they are eligible for any SALT deduction. “To determine eligibility for state and local income taxes, non-SSTBs would need to perform a gross receipts calculation,” said the letter. “To determine eligibility for all other state and local taxes, pass-through entities would need to determine eligibility under the substitute payments provision (another complex set of calculations). Our laws should not discourage the formation of critical service-based businesses and, therefore, disincentivize professionals from entering such trades and businesses. Therefore, we urge Congress to allow all business entities, including SSTBs, to deduct state and local taxes paid or accrued in carrying on a trade or business.”
Tax professionals have been hearing about the problem from the Institute’s outreach campaign.
“The AICPA was making some noise about that provision and encouraging some grassroots lobbying in the industry around that provision, given its impact on accounting firms,” said Jess LeDonne, director of tax technical at the Bonadio Group. “It did survive on the House side. It is still in there, specifically meaning the nonqualifying businesses, including SSTBs. I will wait and see if some of those efforts from industry leaders in the AICPA maybe move the needle on the Senate side.”
Contingency fees
The AICPA also objects to another provision in the bill involving contingency fees affecting the tax profession. It would allow contingency fee arrangements for all tax preparation activities, including those involving the submission of an original tax return.
“The preparation of an original return on a contingent fee basis could be an incentive to prepare questionable returns, which would result in an open invitation to unscrupulous tax preparers to engage in fraudulent preparation activities that takes advantage of both the U.S. tax system and taxpayers,” said the AICPA. “Unknowing taxpayers would ultimately bear the cost of these fee arrangements, since they will have remitted the fee to the preparer, long before an assessment is made upon the examination of the return.”
The AICPA pointed out that contingent fee arrangements were associated with many of the abuses in the Employee Retention Credit program, in both original and amended return filings.
“Allowing contingent fee arrangements to be used in the preparation of the annual original income tax returns is an open invitation to abuse the tax system and leaves the IRS unable to sufficiently address this problem,” said the letter. “Congress should strike the contingent fee provision from the tax bill. If Congress wants to include the provision on contingency fees, we recommend that Congress provide that where contingent fees are permitted for amended returns and claims for refund, a paid return preparer is required to disclose that the return or claim is prepared under a contingent fee agreement. Disclosure of a contingent fee arrangement deters potential abuse, helps ensure the integrity of the tax preparation process, and ensures compliance with regulatory and ethical standards.”
Business loss carryforwards
The AICPA also called for allowing excess business loss carryforwards to offset business and nonbusiness income. It noted that the One Big Beautiful Bill Act amends Section 461(l)(2) of the Tax Code to provide that any excess business loss carries over as an excess business loss, rather than a net operating loss.
“This amendment would effectively provide for a permanent disallowance of any business losses unless or until the taxpayer has other business income,” said letter. “For example, a taxpayer that sells a business and recognizes a large ordinary loss in that year would be limited in each carryover year indefinitely, during which time the taxpayer is unlikely to have any additional business income. The bill should be amended to remove this provision and to retain the treatment of excess business loss carryforwards under current law, which is that the excess business loss carries over as a net operating loss (at which point it is no longer subject to section 461(l) in the carryforward year).
AICPA supports provisions
The AICPA added that it supported a number of provisions in the bill, despite those concerns. The provisions it supports and has advocated for in the past include
• Allow Section 529 plan funds to be used for post-secondary credential expenses;
• Provide tax relief for individuals and businesses affected by natural disasters, albeit not
permanent;
• Make permanent the QBI deduction, increase the QBI deduction percentage, and expand the QBI deduction limit phase-in range;
• Create new Section 174A for expensing of domestic research and experimental expenditures and suspend required capitalization of such expenditures;
• Retain the current increased individual Alternative Minimum Tax exemption amounts;
• Preserve the cash method of accounting for tax purposes;
• Increase the Form 1099-K reporting threshold for third-party payment platforms;
• Make permanent the paid family leave tax credit;
• Make permanent extensions of international tax rates for foreign-derived intangible income, base erosion and anti-abuse tax, and global intangible low-taxed income;
• Exclude from GILTI certain income derived from services performed in the Virgin
Islands;
• Provide greater certainty and clarity via permanent tax provisions, rather than sunset
tax provisions.
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Accounting
Mid-year moves: Why placed-in-service dates matter more than ever for cost segregation planning
In the world of depreciation planning, one small timing detail continues to fly under the radar — and it’s costing taxpayers serious money.
Most people fixate on what a property costs or how much they can write off. But the placed-in-service date — when the IRS considers a property ready and available for use — plays a crucial role in determining bonus depreciation eligibility for cost segregation studies.
And as bonus depreciation continues to phase out (or possibly bounce back), that timing has never been more important.
Why placed-in-service timing gets overlooked
The IRS defines “placed in service” as the moment a property is ready and available for its intended use.
For rentals, that means:
- It’s available for move-in, and,
- It’s listed or actively being shown.
But in practice, this definition gets misapplied. Some real estate owners assume the closing date is enough. Others delay listing the property until after the new year, missing key depreciation opportunities.
And that gap between intent and readiness? That’s where deductions quietly slip away.
Bonus depreciation: The clock is ticking
Under current law, bonus depreciation is tapering fast:
- 2024: 60%
- 2025: 40%
- 2026: 20%
- 2027: 0%
The difference between a property placed in service on December 31 versus January 2 can translate into tens of thousands in immediate deductions.
And just to make things more interesting — on May 9, the House Ways and Means Committee released a draft bill that would reinstate 100% bonus depreciation retroactive to Jan. 20, 2025. (The
The result? Accountants now have to think in two timelines:
- What the current rules say;
- What Congress might say a few months from now.
It’s a tricky season to navigate — but also one where proactive advice carries real weight.
Typical scenarios where timing matters
Placed-in-service missteps don’t always show up on a tax return — but they quietly erode what could’ve been better results. Some common examples:
- End-of-year closings where the property isn’t listed or rent-ready until January.
- Short-term rentals delayed by renovation punch lists or permitting hang-ups.
- Commercial buildings waiting on tenant improvements before becoming operational.
Each of these cases may involve a difference of just a few days — but that’s enough to miss a year’s bonus depreciation percentage.
Planning moves for the second half of the year
As Q3 and Q4 approach, here are a few moves worth making:
- Confirm the service-readiness timeline with clients acquiring property in the second half of the year.
- Educate on what “in service” really means — closing isn’t enough.
- Create a checklist for documentation: utilities on, photos of rent-ready condition, listings or lease activity.
- Track bonus depreciation eligibility relative to current and potential legislative shifts.
For properties acquired late in the year, encourage clients to fast-track final steps. The tax impact of being placed in service by December 31 versus January 2 is larger than most realize.
If the window closes, there’s still value
Even if a property misses bonus depreciation, cost segregation still creates long-term savings — especially for high-income earners.
Partial-year depreciation still applies, and in some cases, Form 3115 can allow for catch-up depreciation in future years. The strategy may shift, but the opportunity doesn’t disappear.
Placed-in-service dates don’t usually show up on investor spreadsheets. But they’re one of the most controllable levers in maximizing tax savings. For CPAs and advisors, helping clients navigate that timing correctly can deliver outsized results.
Because at the end of the day, smart tax planning isn’t just about what you buy — it’s about when you put it to work.
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