Should the CEO be required to sign the corporate tax return? Should the economic substance doctrine be codified? TEI resoundingly responds "no" institute offers views on transfer pricing, DISC/FSC, and several state, local, and provincial matters.

• Position: Recent Activities

The proposal to require a company's chief executive officer to sign its corporate tax return misapprehends the role of the tax department as well as that of the CEO, TEI President Drew Glennie recently wrote the chairman and ranking minority member of the Senate Finance Committee. In an August 22 letter to Senators Max Baucus and Charles Grassley, Mr. Glennie expressed TEI's opposition to section 511 of S. 1971, the National Employee Savings and Trust Equity Guarantee (NESTEG) bill, which would amend section 6062 of the Internal Revenue Code to require that the income tax return of a corporation be signed by its chief executive officer. A similar provision was included, as the "sense of the Senate," in the Sarbanes-Oxley corporate accountability bill, which was signed into law last July.

Mr. Glennie's letter explained that the proposal would not meaningfully advance any legitimate tax policy, and would be burdensome and possibility counterproductive. It also argued that less intrusive, but more effective, alternatives were available. "If Congress determines that the integrity of corporate income tax returns warrants an expanded scope and higher level of internal scrutiny than is currently required," the TEI president stated, "TEI suggests requiring a company's independent audit committee to annually authorize the chief tax officer to sign the corporate income tax return."

"Although TEI shares Congress's and the Administration's shock and disappointment over recent financial reporting failures," Mr. Glennie said, "TEI does not believe the CEO signature proposal will advance the goal of minimizing such failures." While CEOs and other senior corporate officers remain ultimately responsible for the company's compliance with the tax laws, TEI's president explained, "it would be rare that a CEO could be personally involved in, or knowledgeable about, the plethora of tax rules that apply to literally thousands of transactions that are reflected in the company's tax returns." Indeed, Mr. Glennie continued, "the level of detail and specialized knowledge demanded in the preparation and submission of complex corporate tax returns demands that the responsibility for signing the return--and affirming under penalties of perjury the completeness and accuracy of the return--be delegated to an employee with a significant level of professional tax expertise, training, and experience." In TEI's view, the senior tax official is the person in the best position to assess that the return fulfills the company's legal obligations.

"In summary, the proposal to require CEOs to sign corporate tax returns would impose a burden on CEOs that most are ill-trained to bear, would unnecessarily saddle companies with additional compliance costs, and represents a step backward for efficient tax administration since the person signing the return would not be the employee in the best position to ensure the accuracy or completeness of a complex multinational tax return. TEI urges that the proposal either be abandoned or revised substantially," Mr. Glennie concluded.

The provision is reminiscent of proposals that were previously considered during the debate over abusive tax shelters. For example, a senior officer tax return attestation proposal was set forth in the Senate Finance Committee's preliminary draft of proposed legislation to curb abusive tax shelter transactions. After criticism by TEI and others, the proposal was subsequently removed from pending tax shelter legislation. In the organization's view, the proposal will be no more effective in curbing misleading financial reporting practices than the senior officer...