Guidance priorities following enactment of the 1997 tax bill.

• Author: Cherecwich, Paul, Jr.

On September 11, 1997, Tax Executives Institute submitted the following comments to the Internal Revenue Service concerning the agency's guidance priorities in light of the enactment of the Taxpayer Relief Act of 1997. The Institute's comments, which took the form of a letter from TEI President Paul Cherecwich, Jr., to IRS Chief Counsel Stuart L. Brown, was the product of a coordinated effort by the Institute's Federal, International, and IRS Administrative Affairs Committees.

On behalf of Tax Executives Institute, I am pleased to respond to the invitation extended to stakeholders to provide comments on the provisions of the Taxpayer Relief Act of 1997 that should be the focus of immediate guidance from the Treasury Department and the Internal Revenue Service. Soliciting stakeholder views on guidance priorities will have a salutary effect on tax administration by enabling the Treasury Department and IRS to concentrate on matters where the uncertainty engendered by the legislation will either impede legitimate commercial transactions or hinder taxpayer efforts to timely comply with the new provisions. Hence, TEI appreciates the opportunity to provide this input. We urge the Treasury Department and IRS to consider routinely issuing such invitations whenever legislation is enacted just as it routinely solicits input on the annual business plan.

Background

Tax Executives Institute is the principal association of corporate tax executives in North America. Our more than 5,000 members represent the 2,700 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 government alike. As a professional association, TEI is firmly committed to maintaining a tax system that works -- one that is administrable and with which taxpayers can comply.

Members of TEI are responsible for managing the tax affairs of their companies and must contend daily with the provisions of the tax law relating to the operation of business enterprises. We believe that the diversity and professional training of our members enable us to bring an important, balanced, and practical perspective to the issues raised by the Taxpayer Relief Act of 1997.

General

The ink was not dry on the Taxpayer Relief Act of 1997 (hereinafter "the Act") when taxpayers, practitioners, and pundits began tallying the flaws in this complex legislation -- the intricacies of which rival the Tax Reform Act of 1986 for mind-numbing, eyes-glaze-over complexity. Moreover, the final Act was hastily cobbled together from the competing House, Senate, and Administration versions thereby guaranteeing that corrective legislation rather than interpretative guidance is necessary to clarify important provisions. For example, Act section 224 -- relating to contributions of computer and technology equipment for elementary and secondary school purposes -- states that the provision expires for contributions made in tax years beginning after December 31, 1999, whereas the Statement of Managers on H.R. 2014 (Conference Report) explains that the provision will sunset after three years and be effective for contributions made in taxable years prior to January 1, 2001.

While the discrepancy may seem extreme (and that issue may be addressed by the staff of the Joint Committee on Taxation when it issues its Bluebook in connection with the Act), it underscores the need for prompt guidance from the Treasury and the IRS on the issues that can be addressed. Without doubt, there may be provisions where it is unclear whether ambiguous -- or even contradictory -- congressional directives should be addressed through technical corrections legislation or by means of interpretative guidance. In these cases, we urge the IRS to err on the side of administrative action.

Notwithstanding the substantial challenges that the legislation poses for the IRS and taxpayers alike to understand and administer -- and our initial guidance priority list highlights only a few key issues from among its many provisions -- we would be remiss if we did not point out the continuing need for the IRS to provide guidance on other issues. Whether as a result of previous tax acts (e.g., providing guidance to distinguish a product-line extension from a new...