The Senate passed its reconciliation bill July 1, which removes the limit on pass-through businesses’ state and local tax (SALT) deductions. The AICPA sent a letter to Senate leadership expressing strong support of tax-related provisions included in the latest version of the One Big Beautiful Bill Act (OBBB) passed by the Senate. Additionally, the AICPA is urging members of the House of Representatives to join their Senate counterparts in preserving this important deduction.

The Senate bill retains the ability of all pass-throughs to continue to deduct state and local taxes at the entity level, preserving parity between corporations and pass-through entities (PTEs) and allowing PTEs to take the deductions as intended. This comes after the advocacy partnership between CalCPA, AICPA and other state societies.

The AICPA also outlined several other provisions included in the bill.

CalCPA worked with the AICPA and other state CPA societies to encourage action opposing the targeting of pass-throughs, such as those of accountants, dentists, doctors, lawyers and pharmacists, through the elimination of the Pass-through Entity Tax (PTET) SALT deduction. This would increase taxes on the partners/owners of many service-based businesses, such as accounting firms, discourage the creation and growth of such businesses, and further expand the disparity between C corporations and pass-through entities.

CalCPA will continue to follow this issue and provide any further updates.