Good News on INDOPCO, Pre-Filing Agreements Greet TEI Midyear Conference at the Half-Century Mark.

But Corporate Tax Shelters Remains Hot Topic

TEI's 50th Midyear Conference convened on March 19 at the Grand Hyatt Hotel in Washington, D.C., with discussions of capitalization, tax planning issues, and new IRS procedures, but the debate on corporate tax shelters remained in the forefront. Approximately 700 TEI members and guests attended the four-day conference.

At Tuesday morning's keynote address, Assistant Treasury Secretary Jonathan Talisman announced that the IRS and Treasury will give a high priority to resolving INDOPCO, or capitalization, issues during the coming year. He explained that the Treasury Department will undertake not only to issue rulings or regulations on several specific topics, but also to develop more global guidance.

Mr. Talisman thanked the Institute for its comments on INDOPCO issues specifically and guidance priorities generally, and went on to note that most of the items TEI suggested will be included in the 2000 Business Plan that would be released later that day.

The Assistant Secretary also reiterated the Clinton Administration's support for legislation relating to corporate tax shelters. Mr. Talisman said the Treasury's recent disclosure and tax shelter registration regulations address part of the problem, but insisted that legislation was needed to codify the economic substance test, to increase penalties, and thus to change "the cost-benefit analysis" for promoters, advisers, and taxpayers. His remarks echoed those of Deputy Treasury Secretary Stuart Eizenstat whose Monday's keynote speech also touched on corporate tax shelters. Mr. Eizenstat asserted that heftier penalties, a codified economic substance test, and heightened practitioner standards were necessary to affect "both the supply and the demand sides" of abusive transactions.

The Administration's support of tax shelter legislation was balanced by words of concern from Ways and Means Committee Chair Bill Archer. Chairman Archer, who delivered the Tuesday luncheon address, supports shutting down identified tax shelters, but he expressed concern that over-broad legislation would adversely affect legitimate business transactions. He assured the conference that Congress would move prudently. Wednesday morning's keynote speaker agreed with this assessment. Senator Don Nickles, Assistant Majority Leader and a member of the Senate Finance Committee, predicted that no action will be taken on corporate tax shelters this year.

Several conference speakers...