IAA Urges Congress to Restore, Expand Deduction for Investment Advice in Next Stimulus Package

Inside the beltway

IAA Urges Congress to Restore, Expand Deduction
for Investment Advice in Next Stimulus Package

Short Legislative Horizon Requires Adviser Grassroots Support Now

Updated April 3, 2020


The IAA is urging Congress to restore and expand the deduction for advisory fees when it considers a “phase 4” stimulus package in response to the COVID-19 crisis. Congress is in recess until April 20 and will begin consideration of another stimulus bill upon its return.

Trade organizations joining the IAA in this effort include the Certified Financial Planner Board of Standards, the Financial Services Institute, the National Association of Personal Financial Advisors, and the Financial Planning Association.

Congress recognized the value of professional investment and financial planning advice by providing a tax deduction for those services (26 U.S.C. § 212). Congress repealed that limited deduction in 2017 when it passed the Tax Cuts and Jobs Act (TCJA). An unintended consequence of this repeal was raising the cost of financial advice that is critical to investors.

As noted in the one-pager we distributed to key lawmakers and their staffs, the repeal of this deduction may have appeared inconsequential in light of 2017’s rising stock market, sustained job growth and real wage growth. But today, Americans are deeply troubled by stock market volatility, the business environment and the state of their personal household finances. Access to professional financial advice is critically important in these turbulent times.

IAA members and other investment advisers can support our grassroots effort to restore and expand the deductibility of advisory fees by contacting their Senators and Representatives through our easy-to-use Contact Congress tool. It provides a sample letter – which you are free to customize to your liking – and will automatically identify your legislators and email your letters. It is our understanding that House Committee Chairs will be making recommendations for the next stimulus package’s provisions by Friday, April 10 – so the time to act is now.

As part of its response to this unprecedented health and economic crisis, the IAA urged Congress to restore the pre-TCJA tax deduction for investment advisory fees and to do so without the 2 percent Adjusted Gross Income (AGI) threshold that was part of the 2017 law. This threshold, which permitted tax deductions only to the extent they exceeded 2 percent of a taxpayer’s AGI, benefitted upper-income households more than middle income households. All taxpayers need help to obtain the critical financial advice they need now and this deduction should be available to all American households regardless of income.

Although the IAA had hoped that fee deductibility would be included in the “phase 3” package – known as the CARES Act – that was signed into law on March 27, we recognized it was a long shot. The IAA and its partners will now engage their memberships in order to strengthen their lobbying with critically important grassroots advocacy.

In addition to pressing Congress on fee deductibility, the IAA on March 20 co-signed a letter to Congress requesting relief related to retirement plans and savers. Signatories to the letter, which represent plan sponsors and service providers to retirement plans covering millions of workers and retirees, urged immediate Congressional action to provide relief to employers that offer retirement plans, plan participants, and retirees in response to the current crisis created by the outbreak of COVID-19.

The recommendations in the letter addressed a number of matters, including: temporary waiver of required minimum distribution rules; streamlining loan procedures and liberalizing hardship distribution rules; extending filing, notification, and payment deadlines; relief for defined benefit plans; and relief from single-employer Pension Benefit Guaranty Corporation premiums.

The IAA is also supporting other proposals before Congress that would provide relief to small businesses during this crisis.


TAGS: Inside the Beltway, Coronavirus, Advisory Fee Deductibility


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TRADING & BEST EXECUTION SUMMIT KEYNOTE WITH SEC COMMISSIONER HESTER PEIRCE – The impact of COVID-19 on the markets – and the SEC’s response – highlighted SEC Commissioner Hester Peirce’s remarks in her keynote conversation with IAA General Counsel Gail Bernstein. Peirce also addressed the SEC’s work on equity market structure and implications for the buyside – and expressed concerns about liquidity in the fixed income and credit markets during the pandemic.


MORE IAA VIDEOS – including SEC officials speaking at our 2020 Compliance Conference – are on our VIDEOS page.