Recent advocacy projects demonstrate TEI's broad expertise.

• Position: Recent Activities

Cost sharing, IFRS, the Canadian salary deferral rules, retroactive legislation in British Columbia, and the California S&U tax audit penalty--all were the subjects of recent technical activities by Tax Executives Institute. "There's no doubt that TEI's technical committees have been busy since the beginning of the year," TEI President Vincent Alicandri stated. "A review of the table of contents for this issue shows the breadth and depth of the Institute's knowledge of tax policy and administration."

Cost Sharing Regulations

On April 14, TEI filed written comments on the re-proposed cost sharing regulations, commending the government the government for responding positively to comments on the workability of the earlier regulations, which were proposed in 2005. The new regulations are an improvement, the Institute stated, especially in regard to the transition and grandfather rules.

The Institute also testified on the new regulations at the IRS's April 21 hearing. TEI's testimony was presented by Dorothy C. Chao, Senior Tax Counsel for Baxter International Inc. in Deefield, Illinois. The Institute's testimony focused on--

* The contemporaneous documentation requirement

* The maintenance of documents

* The requirements for statements relating to cost sharing agreements

* The division of interests

* The risk exposure of licensing versus cost sharing

* The limited life of certain contributed technology

Under the new regulations, the Institute, explained, a cost sharing arrangement (CSA) must be recorded in a written contract "contemporaneous" with the CSA's formation and signed by all controlled participants within 60 days after the first occurrence of an intangible development cost (IDC). TEI called the 60-day requirement "extremely difficult to satisfy" because compliance requires not only extensive fact gathering, but also forecasting and valuation. The organization recommended that taxpayers be allowed to enter into or revise a CSA contract within 8 1/2 months from the earlier of (i) the date of the first occurrence of an IDC, or (ii) the date when the tax return for the applicable year is filed. Such a rule would be consistent with other deadlines set forth in the regulations.

The 2008 regulations also require controlled participants to update and maintain documentation regarding the scope of the intangible development activity and other requirements. Given the substantial documentation required, TEI recommended that "the final regulations expressly permit the...