Fine-tuning the check-the-box regime.

• Position: Testimony of Tax Executives Institute's Joseph S. Tann, Jr. - Transcript

On August 21, 1996, Tax Executives Institute testified at a public hearing sponsored by the Internal Revenue Service on proposed regulations under section 7701 of the Internal Revenue Code, relating to the simplification of the Code's entity classification rules. The Institute's testimony was presented by Joseph S. Tann, Jr. of Ameritech Corporation, chair of the Institute's International Tax Committee, and highlights the position set forth in TEI's August 9, 1996, written comments on the proposed regulations, as well as TEI's earlier comments on the proposed "check-the-box" entity classification regime. (The Institute's comments are reprinted elsewhere in this issue. Mr. Tann's prepared statement is reprinted below.

Good morning. My name is Joseph S. Tann, Jr., and I am Manager of Tax Planning & Research for Ameritech Corporation. I am here today as Chair of the International Tax Committee for Tax Executives Institute, which represents tax professionals from the 2,700 largest companies in the United States and Canada.

Prefatory Comments

TEI commends the IRS for proposing a bold, elective approach to resolving the manner in which business entities are classified for tax purposes. The regulations provide an opportunity for clarity, certainty, and simplicity without significant technical compromise or revenue loss.

TEI has previously expressed a strong belief for including foreign entities in any entity classification regulations. Taxpayers and the IRS need a classification system that yields clear and predictable results, and this need is not confined to the U.S. but extends beyond U.S. borders. As a practical matter business entities are generally able to obtain the tax-law result they want albeit at the cost of scarce taypayer and IRS resources better directed to other matters. TEI applauds the IRS for including foreign entities in the proposed regulations and urges the issuance of final regulations as soon as possible.

The remainder of my comments will focus on the Per Se List, which is unique to foreign entity classification, and the proposed effective date of the final regulations.

Per Se List

With respect to the Per Se List, I have an observation and a couple of comments. First my observation. While the Per Se List, which is the foreign analogue to state-law corporations, may serve to limit the reach of elective entity classification to current law flexibility, the certainty -- and related better resource allocation -- promised by this...