Corporate estimated tax rules.

On April 16, 1993, Tax Executives Institute sent the following comments to the Department of the Treasury concerning the corporate estimated tax rules of the Internal Revenue Code. The comments, which took the form of a letter from TEl President Bob Perlman to J. Paul Whitehead of Treasury's Office of Tax Policy, were prepared in response to a request from James Fields, acting Assistant Secretary of the Treasury for Tax Policy. Copies of the two appendices referred to in the comments will be provided upon written request. The Institute's submission was prepared under the aegis of its IRS Administrative Affairs Committee, whose chair is W. Remi Taylor of Duke Power Company.

This letter responds to Acting Assistant Secretary Fields's and your request for TEI's comments on the annualization rules for corporate estimated tax payments under section 6655 of the Internal Revenue Code. It thus supplements the Institute's March 17 testimony before the House Committee on Ways and Means concerning President Clinton's Proposals for Public Investment and Deficit Reduction.

During his March 22 remarks to TEI's Midyear Conference, Mr. Fields expressed surprise at TEI's testimony on the corporate estimated tax rules, observing that "we haven't [previously] heard much about the annualization rules." In all candor, the Institute is surprised by Treasury's "surprise-" For more than a decade TEl has voiced concern about the inequitable and unrealistic interaction of the Code's estimated tax and interest provisions. The Institute has consistently supported reinstatement of a meaningful estimated tax safe harbor for so-called large corporations. Our March 17 testimony simply reaffirmed TEI's support for reinstating an elective safe harbor based on prior year's (or years') tax liability.

The reason for our supporting changes to the corporate estimated tax rules is elementary: taxpayers want and need certainty of their tax results. The annualization rules regrettably engraft on the determination of estimated tax payments an uncertainty comparable to that which exists in determining a taxpayer's annual taxable income--plus a few additional wrinkles. By contrast, an objective, almost mechanical safe harbor would eliminate the guesswork in calculating estimated tax payments by establishing a single number to aim for--one that is capable of precise and verifiable confirmation.

TEI's testimony on the President's proposals (a copy of the relevant portion of which is...