CEO signature requirement deleted from tax bill TEI presses for its Abandonment; Institute analyzes International Accounting Standards, IRS claims process, stock option withholding, and FIE/NRT legislation.

• Position: Recent Activities

Urging Congress to abandon proposals to require the CEO to sign a corporation's federal tax return remained high on TEI's legislative agenda as summer approached. On June 11, the Institute filed comments with the Senate Finance Committee, urging Congress to abandon the proposal, which would require the CEO to "focus on the tax returns of a company rather than the process of ensuring the complete and proper reporting of its tax obligations." The proposal passed the Senate as part of the Jobs and Growth Tax Relief Reconciliation Act of 2003, but was deleted before the bill was enacted.

In opposing the legislation, TEI noted that Congress has already acted forcefully to enhance corporate accountability. "The Sarbanes-Oxley Act of 2002 significantly strengthened the accountability of CEOs and Chief Financial Officers for corporate financial matters, including new and strengthened civil and criminal penalties for violations," the Institute stated. "CEOs are now required to certify the financial statements of corporations, which contain a provision for taxes. This certification requirement properly and adequately ensures that the CEO is committed to, and responsible for, the fair presentation of the company's financial results, including its tax positions, and that the CEO and the company have taken adequate steps to institute and maintain a process to achieve that result."

Although the provision was not included in the most recent tax bill, significant support remains in the Senate to resurrect it later in the session. One version passed the Senate (S. 476) and currently awaits action in the House. "TEI will continue to highlight the problems with this proposal, which not only misapprehends the role of the CEO and the tax director, but also minimizes the safeguards that already exist," TEI President J.A. (Drew) Glennie stated. "The proposal should be abandoned or, at a minimum, at least significantly recast to better accomplish its goals without unduly burdening compliant companies."

TEI's letter is reprinted in this issue, beginning at page 222.

Withholding on Nonqualified Stock Option Exercises

On June 9, TEI wrote to the Treasury Department and IRS to request the issuance of guidance clarifying when income tax withholding and employment tax deposits are due following the exercise of nonqualified stock (NQSOs). During its February liaison meetings with the IRS Large and Mid-Size Business (LMSB) Division and the Treasury Department, TEI expressed concerns about reports that the IRS was asserting or threatening assertion of penalties against employers for failing to timely deposit employment and income tax liabilities where such amounts exceeded $100,000 and were not deposited by the day after the exercise of the NQSOs. Noting the lack of clear guidance on the date wages are considered paid upon the exercise of NQSOs, TEI contended it would be...