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Federal Legislation Proposed Impacting Pass-Through Entity Tax

May 16, 2025

The OSCPA, alongside the AICPA and other societies, is monitoring the proposed federal tax legislation, which includes updates to Pass-Through Entity Tax (PTET) that could have serious implications for the CPA profession.

The previous iteration, which was approved in May by the House, would subject specified service trades or businesses (SSTBs)—including accountants, attorneys, dentists, and physicians—to the individual cap on state and local income tax deductions by eliminating PTET elections. 

This would apply across all income levels and regardless of where the taxpayer resides, effectively penalizing thousands of professionals and business owners nationwide by increasing 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.

On June 19, the U.S. Senate made provisions to the bill, showing effort to improve and correct the targeting of SSTBs.However, some language which causes inequitable treatment of pass-through entities compared to corporations remained and would still result in a tax increase for all pass-through businesses, such as CPA firms. 

On July 1, a revised version of the bill was approved by the Senate, which removes the limit on pass-through businesses’ state and local tax (SALT) deductions entirely. The AICPA sent a letter to the Senate in support and appreciation of their efforts to preserve SALT deductions. 

The bill has since passed the House and been signed into law by the President. 

Your Voice Matters

In May, OSCPA members spent time in Washington, D.C. discussing this bill and others with U.S. Congress members representing Oklahoma. 

We will provide additional updates as we work alongside the AICPA to provide insight and support for CPA firms and small businesses. 

Learn more about the bill from the AICPA and find links below to help you get involved and stay informed: