Allocation and apportionment of research and experimental expenditures.

On April 30, 1992, Tax Executives Institute filed the following comments with Assistant Treasury Secretary Fred T Goldberg, Jr., requesting the Treasury Department to amend the allocation and apportionment regulations under Treas. Reg. [subsection] 1.861-8(e)(3), which govern the treatment of research experimental expenditures. The comments were prepared under the aegis of the Institute's International Tax Committee whose chair is Raymond G. Rossi of Intel Corporation.

Senator Bentsen and Representative Rostenkowski have written to Secretary Nicholas F. Brady urging the Department of the Treasury to amend the income tax regulations concerning the allocation and apportionment of research and experimental expenditures under section 861(b) of the Internal Revenue Code. The current regulations, promulgated in 1977, have been in effect intermittently for fewer than 5 of the past 15 years because of various congressional moratoria on its enforcement. The latest temporary legislative approach set forth in section 864(f) of the Code is set to expire on June 30, 1992. Tax Executives Institute supports the effort to resolve this issue administratively on a basis consistent with the extant legislation.

Background

Tax Executives Institute (TEI) is the principal association of corporate tax executives in North America. Our approximately 4,800 members are employed by more than 2,000 of the leading corporations in the United States and Canada. TEI represents a cross-section of the business community, and is dedicated to the development and effective implementation of sound tax policy, to promoting the uniform and equitable enforcement of the tax laws, and to reducing the cost and burden of administration and compliance to the benefit of taxpayers and the government alike.

As a professional association, TEI is firmly committed to maintaining a tax system that works - one that is consistent with sound tax policy, one that taxpayers can comply with, and one in which the Internal Revenue Service can effectively perform its examination function. Many of TEI's members work for multinational enterprises for which the allocation and apportionment rules of Treas. Reg. [subsection] 1.861-8 have a substantial impact. For example, they know first-hand the counterproductive effect of the on-again, off-again legislative moratorium. They know first-hand of the need for certainty in an area where the tax rules are intended, at least in part, as an incentive to U.S.-based...