Accounting
The 2024 election’s consequences on tax
The 2024 election has the potential to be one of the most consequential for the American tax system in recent memory.
This is largely due to the sunsetting provisions of the 2017 Tax Cuts and Jobs Act, which will either expire and revert to their pre-TCJA rules or will be replaced by new legislation — making who wins what on Nov. 5 especially critical.
“The conversation will change once we understand the balance of power heading into the 119th Congress,” said Kasey Pittman, director of tax policy at the Washington tax council practice of Top 10 Firm Baker Tilly. “We’ll be able to be a little bit more focused on potential outcomes.”
For example, research and experimental deductions are certainly on the table, according to Pittman. “We saw pervasive support for that in a bipartisan bill in the House at the beginning of the year,” she said. “The vote tally was 374 for the bill, and 70 against. The bill included three TCJA provisions that have already changed or begun to sunset — the Section 174 deduction, the calculation of [adjusted taxable income] for the Section 163(j) limitation, and the phaseout of bonus depreciation.”
Alex Wroblewski/Bloomberg
The bill failed in the Senate but not due to lack of support for the business provisions, according to Pittman.
“There was some politics involved. For example Senator Crapo, believing that Republicans will have more leverage after the 2024 election, didn’t wish to provide as much support for changes to the Child Tax Credit as the bipartisan bill called for. The stumbling block in the Child Tax Credit wasn’t the top line amount of the credit, but the refundability of the credit,” she said. “I think there’s just an ideological difference between the parties on how the credit should function.”
The TCJA was passed in late 2017 and took effect in 2018, Pittman observed, and the circumstances of its passage had important ramifications.
“It was passed using reconciliation, which takes the use of the filibuster off the table in the Senate but comes with certain restrictions, including revenue restrictions within the budget window and an inability to increase the federal deficit outside of the budget window,” Pittman explained. “Republicans weren’t able to fit all of their priorities into these parameters permanently, so some provisions were made temporary. The corporate tax rate, which was what I consider the headline of the tax bill, was made permanent, but a lot of other provisions, including the individual rate cuts, were temporary and will expire at the end of 2025.”
“The Child Tax Credit was increased from $1,000 to $2,000,” she continued. “Personal exemptions were eliminated, and itemized deductions changed to include the SALT cap. Less of a factor will be the sunset of the increased estate tax exemption. But overall, there is no individual taxpayer in the United States who will not be affected by the Tax Cuts and Jobs Act expirations.”
Although it’s not talked about as much, there is a bipartisan consensus in that Democrats also would like to extend tax cuts — the TCJA or an equivalent regime, according to Pittman.
“We haven’t seen the detail for taxpayers making under $400,000 and that’s the vast majority of taxpayers,” she said. “So I think there is alignment in that Democrats and Republicans don’t want to see tax increases. They don’t want the TCJA to sunset for taxpayers making under $400,000 a year. The parties diverge on cuts for those making over $400,000.”
Wealth and gains
There is currently much misinformation going around regarding the taxation of unrealized gains, according to Pittman. There was an example on TikTok that suggested that if you buy a house for $200,000 and its value increases to $400,000, you have to fork over $50,000 on the $200,000 appreciation. “That’s just not the case, so we’re combating misinformation here.”
There are actually at least three proposals for a wealth tax, according to Pittman. Sen. Ron Wyden, chairman of the Senate Finance Committee, has one proposal, Senator Elizabeth Warren has a separate proposal, and the Biden Fiscal Year 2025 Green Book, which vice president and presidential contender Kamala Harris has said she supports, has a third.
“All three of these proposals are different,” said Pittman. “But we don’t think it’s likely that this will become law, and here’s why: First, there would need to be a Democratic sweep, and the math in the Senate isn’t supportive of that. There are 33 normal seats and one special election, so there are 34 seats up for election. Of these, 23 are Democratic seats and only 10 are Republican seats. So Democrats have to defend more than double the number of seats than Republicans do, and we already know that Sen. Joe Manchin’s seat is very, very likely to flip. So if you flip Sen. Manchin’s seat, that means Democrats have to defend every single other seat, just to wind up with a 50-50 split in the Senate. And almost all of the toss-up or competitive states currently have Democratic incumbents. And even with a Democratic sweep, it would still be necessary to get everyone on the same page, and not every Democrat has voiced support for such a tax.”
Moreover, if they were successful in passing a wealth tax on unrealized appreciation in assets, it’s very likely to face a challenge from the right.
“A recent Supreme Court decision was ultimately silent on whether there needs to be a realization to have a tax,” Pittman said. “Four justices noted that they believe that there is a realization requirement, one justice noted that she does not believe there is such a requirement, and the other four justices were silent. So the likelihood of it being enacted and then withstanding challenges seems very low.”
David Wagner, head of equity and portfolio manager at Aptus Capital Advisors, agreed that there is likely to be at least a split Congress, with Republicans taking control of the Senate. He believes that the Republicans are likely to win both West Virginia and Montana, giving them control of the Senate. This will limit the size and level of tax increases if it happens. The current statutory rate on domestic corporate income is 21% — down from 35% in 2017 — but the total effective tax rate paid by the typical S&P 500 company is 19%. Although many of the individual cuts will sunset in 2025, the corporate rate will not change.
Looking back at the TCJA in 2017, Wagner said that the S&P 500 rallied by the same amount as the earnings boost it received. From November 2017 to January 2018, the market rallied 10%, as earnings were expected to get a one-time boost of 11%. This suggests that it is too early to make a tangible investment call solely due to taxes.
Over the last few years, AI has gone from being a novelty to a mission-critical business strategy for many accountants. Innovative, forward-thinking firms are using these tools to streamline manual tasks, ensure compliance and provide the best possible service to their clients. According to the 2025 Intuit QuickBooks
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However, AI adoption is at varying levels across the industry. While nearly every firm has begun experimenting with basic AI tools, many remain in a sandbox phase, hesitant to move toward full-scale integration due to perceived complexity or costs.No matter where you may fall on the integration spectrum, the fact remains: AI is rapidly reshaping the accounting industry. If you’ve delayed AI adoption in your business, you’ll want to create a focused plan to catch up.
Time is of the essence, but don’t sacrifice strategy for speed
Firms that are ready to take the leap from casual use to deep integration may find themselves in need of accelerated adoption, but speed should not come at the cost of strategy. Identify tangible, practical ways that easy-to-use tools can impact your business through automation. Having a strong strategic focus allows firms to implement workflow changes to streamline manual tasks, ensure compliance and provide excellent service to your clients.
To begin your AI journey, here is a four-step plan that firms can use to transition from experimentation to execution, in a safe, practical manner:
Step 1: Kick off your first AI project
As is the case with many things, getting started is often the most challenging step. While enthusiasm is high, uncertainty with implementation risks can cause hesitation. The key is to lower risk by embracing AI and implementing an intentional, phased approach. Begin by weaving AI tools into high-impact, low-risk tasks, such as summarizing meeting notes, drafting client or firm-wide memos, or translating complex concepts into easy-to-understand ideas. Monitor results carefully and, if these initial attempts need adjustment, be prepared to pivot to the next use case until you can clearly demonstrate that AI systems are delivering a measurable impact on your operations. From there, you can learn from early experiences, adapt strategy, and scale appropriately to complete more complex projects.
Step 2: Dig into your AI toolkit
The marketplace is crowded with AI-powered tools that promise to do everything from enhancing your workflows to improving the customer experience. It can be hard to know which ones are worth investing your time and money. Find a trusted source like a respected peer, or leverage your professional network to help discuss the tools that may be the best fit for achieving your business goals. You can also look within the tools you’re already using to see if they offer AI-powered features, which can help ease into the transition. Additionally, look for free high-quality education to upskill your team. For example, Anthropic offers a Claude AI University that provides excellent foundational resources for moving beyond basic prompts.
Step 3: Review an AI security checklist
An important element in AI implementation is security. With AI tools needing access to firm and client data to function, it leads to questions of how the data will be protected. This makes the right AI and cybersecurity strategy critical. Firms must proactively ensure that client data remains protected from today’s increasingly sophisticated threats by embracing an established cybersecurity framework such as
Step 4: Openly discuss AI usage with your clients
Once you’ve established the best way to use AI tools that meet your firm’s needs, you’ll want to communicate all of the advantages afforded by these tools to your clients. Make sure you highlight the benefits and simultaneously ensure you are addressing any potential concerns. It’s also important to get explicit consent from all clients if you’re sharing their information with the third-party tools you may use. While this might seem like an extra step, it will go a long way toward fostering a greater level of transparency and deepen trust between you and your clients.
Don’t get left behind
Adopting AI does not have to be intimidating, expensive or overly complex. Think of it as a strategic business move that will not only keep you competitive, but will potentially free you up to focus on keeping clients happy and growing your practice. By strategically focusing on these best practices, identifying AI use cases in a phased approach, evaluating the right tools for your business, ensuring client information is secure and clearly communicating your AI strategy, you’ll be AI-ready in no time.
The Financial Accounting Standards Board met this week to discuss its projects on accounting for transfers of cryptocurrency assets and enhancing the disclosures around certain digital assets, such as stablecoins.
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During Wednesday’s meeting, FASB’s board made certain tentative decisions, according to a
At a future meeting, the board plans to consider clarifying the derecognition guidance for crypto transfer arrangements to assess whether the control of a crypto asset has been transferred.
FASB also began deliberations on the
The board decided to provide illustrative examples in Topic 230, Statement of Cash Flows, to clarify whether certain digital assets such as stablecoins can meet the definition of cash equivalents. It also decided to include the following concepts in the illustrative examples:
- Interpretive explanations that link to the current cash equivalents definition;
- The amount and composition of reserve assets; and,
- The nature of qualifying on-demand, contractual cash redemption rights directly with the issuer.
FASB plans to clarify that an entity should consider compliance with relevant laws and regulations when it’s creating a policy concerning which assets that satisfy the Master Glossary definition of the term “cash equivalents“ will be treated as cash equivalents.
“I agree with the staff suggestion to look at examples,” said FASB vice chair Hillary Salo. “From my perspective, I think that is going to help level the playing field. People have been making reasonable judgments. I agree with that. And I think that this is really going to help show those goalposts or guardrails of what types of stablecoins would be in the scope of cash equivalents, and which ones would not be in the scope of cash equivalents. I certainly appreciate that approach, and I think it has the least potential impact of unintended consequences, because I do agree with my fellow board members that we shouldn’t be changing the definition of cash equivalents, and it’s a high bar to get into the cash equivalent definition.”
“I’m definitely supportive of not changing the definition of cash equivalents,” said FASB chair Richard Jones. “I believe that’s settled GAAP in a way, and we’re not really seeing a call to change it for broader issues. I am supportive of the example-based approach. The challenge with examples, though, is everybody’s going to want their exact pattern, but that’s not what we’re doing.”
The examples will explain the rationale for how digital assets such as stablecoins do or do not qualify as cash equivalents and give a roadmap for other types of digital assets with varying fact patterns to be able to apply.
“We really don’t want to be as a board facing a situation where something was a cash equivalent and then no longer is at a later date,” said Jones. “That’s not good for anyone, so keeping it as a high bar with certain rigid criteria, I think, is fine.”
Stablecoins are supposed to be pegged to fiat currencies such as U.S. dollars and thus provide more stability to investors. “In my view, while a stablecoin may meet the accounting definition established for cash equivalents, not every one of those stablecoins in the cash equivalent classification represents the same level of risk,” said FASB member Joyce Joseph.
She noted that the capital markets recognize the distinctions and have established a Stablecoin Stability Assessment Framework to evaluate a stablecoin’s ability to maintain its peg to a fiat currency. Such assessments look at the legal and regulatory framework associated with the stablecoin, and provide investors with information that could enable them to do forward-looking assessments about the stability of the stablecoin.
“However, for an investor to consider and utilize such information for a company analysis the financial statement disclosures would need to include information about the stablecoin itself,” Joseph added. “In outreach, the staff learned that investors supported classifying certain stablecoins as cash equivalents when transparent information is available about the entities at which the reserve assets are held. Therefore, in my view, taking all of this into consideration a relevant and informative company disclosure would include providing investors with the name of the stablecoin and the amount of the stablecoin that is classified as a cash equivalent, so investors can independently assess the liquidity risks more meaningfully and more comprehensively by utilizing broader information that is available in the capital markets and its emerging information.”
Such information could include the issuer, reserves, governance and management, she noted, so investors would get a more holistic look at the risks that holding the stablecoin would entail for a given company.
The board decided to require all entities to disclose the significant classes and related amounts of cash equivalents on an annual basis for each period that a statement of financial position is presented.
Entities should apply the amendments related to the classification of certain digital assets as cash equivalents on a modified prospective basis as of the beginning of the annual reporting period in the year of adoption.
FASB decided that entities should apply the amendments related to the disclosure of the significant classes and amounts of cash equivalents on a prospective basis as of the date of the most recent statement of financial position presented in the period of adoption.
The board will allow early adoption in both interim and annual reporting periods in which financial statements have not been issued or made available for issuance.
FASB also decided to permit entities to adopt the amendments to be illustrated in the examples related to the classification of certain digital assets as cash equivalents without the need to perform a preferability assessment as described in Topic 250, Accounting Changes and Error Corrections.
The board directed the staff to draft a proposed accounting standards update to be voted on by written ballot. The proposed update will have a 90-day comment period.
Senators introduced several pieces of tax-related legislation this week, including measures aimed at improving customer service at the Internal Revenue Service, cracking down on tax evasion and curbing the carried interest tax break, in addition to efforts in the House to repeal the Corporate Transparency Act.
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Senators Bill Cassidy, R-Louisiana, and Mark Warner, D-Virginia, teamed up on introducing a bipartisan bill, the
The bill would establish a dashboard to inform taxpayers of backlogs and wait times; expand electronic access to information and refunds; expand callback technology and online accounts; and inform individuals facing economic hardship about collection alternatives.
“Taxpayers deserve a simple, stress-free experience when dealing with the IRS,” Cassidy said in a statement Wednesday. “This bill makes the process quicker and easier for taxpayers to get the information they need.”
He also mentioned the bill during a
“I’m happy to meet with the team … and do all I can to make it as good as you want it to be,” said Bisignano.
“My bill would equip the IRS with the legislative mandate to create an online dashboard so that taxpayers can monitor average call wait time and budget time accordingly,” said Cassidy. He noted that the bill would allow a callback for taxpayers that might need to wait longer than five minutes to speak to a representative, and establish a program to identify and support taxpayers struggling to make ends meet by providing information about alternative payment methods, such as installments, partial payments and offers in compromise.
“I know people are kind of desperate and don’t know where to turn for cash, so I think this could really ease anxiety,” he added. “This legislation is bipartisan and is likely to pass this Congress.”
Cassidy and Warner
“Taxpayers shouldn’t have to jump through hoops to get basic answers from the IRS — and in the last year, those challenges have only gotten worse,” Warner said in a statement. “I am glad to reintroduce this bipartisan legislation on Tax Day to ease some of this frustration by increasing clear communication and making IRS resources more readily available.”
Stop CHEATERS Act
Also on Tax Day, a group of Senate Democrats and an independent who usually caucuses with Democrats teamed up to introduce the Stop Corporations and High Earners from Avoiding Taxes and Enforce the Rules Strictly (Stop CHEATERS) Act.
Senate Finance Committee ranking member Ron Wyden, D-Oregon, joined with Senators Angus King, I-Maine, Elizabeth Warren, D-Massachusetts, Tim Kaine, D-Virginia, and Sheldon Whitehouse, D-Rhode Island. The bill would provide additional funding for the IRS to strengthen and expand tax collection services and systems and crack down on tax cheating by the wealthy.
“Wealthy tax cheats and scofflaw corporations are stealing billions and billions from the American people by refusing to pay what they legally owe, and far too many of them are getting a free pass because Republicans gutted the enforcement capacity of the IRS,” Wyden said in a statement. “A rich tax cheat who shelters mountains of cash among a web of shell companies and passthroughs is likelier to be struck by lightning than face an IRS audit, and Republicans want to keep it that way. This bill is about making sure the IRS has the resources it needs to go after wealthy tax cheats while improving customer service for the vast majority of American taxpayers who follow the law every year.”
Earlier this week. Wyden also
The Stop CHEATERS Act would provide the IRS with additional funding for tax enforcement focused upon high-income tax evasion, technology operations support, systems modernization, and taxpayer services like free tax-payer assistance.
“As Congress seeks ways to fund much-needed policy priorities and address our growing national debt, there is one common sense solution that should have unanimous bipartisan support: let’s enforce the tax laws already on the books,” said King in a statement. “Our legislation will make sure the IRS has the resources it needs to confront the gap between taxes owed and taxes paid – while ensuring that our tax enforcement professionals are focused on the high-income earners who account for the most tax evasion. This is a serious problem with an easy solution; let’s pass this legislation and make sure every American pays what they owe in taxes.”
Carried interest
Wyden, King and Whitehouse also teamed up on another bill Thursday to close the carried interest tax break for hedge fund managers that
Carried interest is a form of compensation received by a fund manager in exchange for investment management services, according to a
Under the bill, the
“Our tax code is rigged to favor ultra-wealthy investors who know how to game the system to dodge paying a fair share, and there is no better example of how it works in practice than the carried interest loophole,” Wyden said in a statement. “For several decades now we’ve had a tax system that rewards the accumulation of wealth by the rich while punishing middle-class wage earners, and the effect of that system has been the strangulation of prosperity and opportunity for everybody but the ultra-wealthy. There are a lot of problems to fix to restore fairness and common sense to our tax code, and closing the carried interest loophole is a great place to start.”
Repealing Corporate Transparency Act
The House Financial Services Committee is also planning to markup a bill next Tuesday that would fully repeal the Corporate Transparency Act, which has already been significantly
If enacted, the repeal would eliminate beneficial ownership reporting requirements, removing a transparency measure designed to help law enforcement and national security officials identify who is behind U.S. companies.
“This repeal would turn the United States back into one of the easiest places in the world to set up anonymous shell companies, something Congress worked for years to fix,” said Erica Hanichak, deputy director of the FACT Coalition, in a statement. “These entities are routinely used to facilitate corruption, financial crime, and abuse. Rolling back the CTA doesn’t just weaken transparency, it signals to bad actors around the world that the U.S. is once again open for illicit business.”
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