October 12, 2018

Tax reform update for law firms

Republican leaders in the U.S. House of Representatives and the Senate recently released copies of their sweeping new tax plans. Neither bill includes proposals that would have required many law firms to switch from cash to accrual accounting and therefore pay taxes on "phantom income" they have not received and may never receive. The American Bar Association has worked tirelessly over the past four years to resist efforts by some in Congress to force law firms to adopt this unfair accounting method and accelerate their tax payments. As House and Senate leaders continue to debate their respective tax bills, the ABA will closely monitor both to ensure that the damaging accrual provisions are not included in the legislation.