AICPA and 53 CPA Societies Push Back on SALT Deduction Limits for Pass-Through Entities

In the latest twist in federal tax reform negotiations, the accounting industry is sounding the alarm over a provision that could drastically impact thousands of CPA firms and professional service providers.

The AICPA, backed by 53 state CPA societies, has publicly opposed a provision in the recently passed House budget bill that would limit the state and local tax (SALT) deduction for specified service trades or businesses (SSTBs)—including accounting, law, consulting, and more.

What’s Being Proposed?

The House-approved provision would restrict the ability of SSTBs operating as pass-through entities (PTEs)—such as S corps and partnerships—to claim the entity-level SALT workaround deduction.

This deduction, introduced after the 2017 Tax Cuts and Jobs Act capped individual SALT deductions at $10,000, has been critical for high-income professionals in states like New York, California, and New Jersey. It allowed PTEs to pay state income taxes at the entity level and deduct them fully, bypassing the individual cap.

Now, that workaround may no longer be available to the very professionals who helped clients implement it.

Why CPAs Are Pushing Back

The AICPA argues that this proposed limitation would:

• Effectively raise taxes on small and mid-sized professional firms

• Disrupt parity between C corporations and pass-through entities

• Penalize industries already constrained by rising compliance costs and complex regulation

  
  

Barry Melancon, President and CEO of the AICPA, noted that, “Targeting service firms undermines the fairness and neutrality that the tax code should strive for. This provision would hurt the very professionals helping taxpayers comply with these evolving laws.”

The Policy Context

This SALT workaround rollback is surfacing as part of a broader budget and tax overhaul being debated in Washington. Lawmakers are looking for offsets to pay for major extensions to the TCJA, increased defense spending, and infrastructure outlays.

However, critics argue that singling out SSTBs for revenue raises equity issues and could destabilize professional services in high-tax states.

What Tax Professionals Should Do Now

If you're advising clients in accounting, law, consulting, healthcare, or similar SSTBs, now is the time to:

• Evaluate 2024 and 2025 entity tax election strategies

• Run projections assuming PTE SALT deduction disallowance

• Review partnership and shareholder agreements for allocation impacts

• Advise clients on potential restructuring or entity conversion scenarios

  
  

The AICPA is urging members to stay engaged, write to legislators, and reinforce the importance of maintaining fair treatment for all business types.

How Bizora AI Helps You Stay Ahead

Bizora AI keeps you updated on key legislative movements — and helps you make sense of them in real time. With Bizora, you can:

• Pull updated state-by-state SALT deduction rules

• Run what-if scenarios for entity-level tax planning

• Generate client-ready memos explaining the proposed changes

  
  

Want to know how SALT deduction changes may impact your SSTB clients?→ Ask Bizora AI and get plain-English answers, fast.