Tax Executives Institute--U.S. Department of Treasury liaison meeting: February 6, 2002.

On February 6, 2002, Tax Executives Institute held its annual liaison meeting with the Office of Tax Policy of the U.S. Department of Treasury. The agenda for the meeting was published in the January-February 2002 issue of The Tax Executive. The minutes follow:

I. Introductory Comments

On behalf of the U.S. Treasury Department's Office of Tax Policy, Assistant Secretary Mark A. Weinberger welcomed TEI President Robert L. Ashby and the other members of the delegation from Tax Executives Institute to the liaison meeting. Mr. Weinberger observed that the Treasury Department often derives more benefit from its meetings with TEI than the Institute does. Liaison meetings are only part of the dialogue, he noted, adding that Treasury benefits from and is always open to TEI comments. TEI thanked the Treasury representatives for meeting with the Institute. The delegations for the Treasury Department and TEI at the liaison meeting are set forth below.

II. Legislative Priorities

Mr. Weinberger discussed the fiscal outlook for the upcoming year. The Administration's recent budget presents a different economic picture from prior years, he stated, reflecting the events of September 11 and the uncertainty among consumers. Even with the 2002 tax cut, he added, the government's collection of taxes as a percentage of GDP is at an all-time high (19 percent).

Mr. Weinberger explained that the Administration supports enactment of the economic stimulus legislation to spur economic growth, adding the proposed two-year extension of the expiring tax provisions is not long enough. The legislation would speed up the recovery, he said, noting that the Administration views the package as an "insurance policy." We were lucky last year that the arrival of the tax rebate checks and the reduced withholding softened some recessionary effects, he concluded.

TEI referred to the recent testimony of Treasury Secretary Paul O'Neill, which addressed a renewed interest in pension reform and legislation dealing with so-called tax havens. What is the potential for legislation in these areas?

Mr. Weinberger explained that several bills have been introduced to address the retirement security issues relating to the Enron situation. The situation raises tough issues, including diversification of assets, disclosure, blackout periods, and education of employees. Although Congress is considering the establishment of caps on employee-held stock, the Administration is more interested in ensuring adequate disclosure, education, and choices for employees. The objective is to provide sufficient rights to the employees without unduly restricting their ability to hold employer stock or causing the employer to withdraw benefits, he stated.

Mr. Weinberger noted that Enron's use of off-shore partnerships and the number of entities in the Cayman Islands have also raised concerns. The Senate Finance Committee is reviewing the situation, he stated, adding that hearings will be held.

III. Regulatory Guidance

1. 2002 Priorities. Mr. Weinberger remarked on the need for general guidance for both the IRS and taxpayers. With the appointment of B. John Williams as IRS Chief Counsel, he stated, we have an opportunity to consider how the guidance process should be revised. Messrs. Williams and Solomon and Ms. Olson will be working together on the guidance plan. TEI's input is vital to the process, Mr. Weinberger stated, adding that a notice requesting comments on the 2002 guidance priority list will be issued soon.

   Mr. Weinberger stated that Treasury has redoubled its efforts to obtain tax information exchange agreements with other countries. Such agreements are a high priority in the government's anti-tax shelter campaign, he said. The government is working with the Organization for Economic Cooperation and Development to emphasize information exchange among countries rather than harmful tax competition. Mr. Weinberger noted that the United States has reached agreements with the Cayman Islands, Antigua and Barbuda, and the Bahamas, which will provide information to the government from large financial centers. TEI commended the Treasury Department for shifting the emphasis of the OECD project.

   TEI also commended Treasury for its efforts to provide timely and administrable guidance, citing the government's response to the September 11 attacks, the re-proposed research credit regulations, the notice on capitalization issues, and, most recently...