The need for interest netting guidance.

• Position: IRS guidance

October 14, 1999

On October 14, 1999, Tax Executives Institute submitted the following comments to the Secretary of the Treasury, Lawrence H. Summers, and the Commissioner of Internal Revenue, Charles O. Rosotti, concerning the need for guidance on retrospective interest-netting rules of the IRS Restructuring and Reform Act of 1998. The comments took the form of a letter from TEI President Charles W. Shewbridge, III, and were prepared under the aegis of the Institute's IRS Administrative Affairs Committee, whose chair is Robert J. McDonough, Jr. of Wang Global, Inc. The Internal Revenue Service issued the requested guidance on November 9.

On behalf of Tax Executives Institute, I am writing to urge the Treasury Department and Internal Revenue Service to issue guidance as expeditiously as possible concerning how taxpayers may elect to apply the interest netting rules of section 6621(d) of the Internal Revenue Code. Enacted as part of the IRS Restructuring and Reform Act, the statute provides a transition rule permitting taxpayers to apply the ameliorative netting provision to prior years if an election is filed before December 31, 1999. With less than three months to go until the transition period expires, no guidance has been issued concerning how this election is to be made, where taxpayers are to file the election, and what information is to be submitted.

TEI is the preeminent association of business tax executives in North America. Our approximately 5,000 members represent 2,800 of the leading corporations through 52 chapters in the United States, Canada, and Europe. As a broad-based organization dedicated to fair and efficient tax administration, TEI has long been concerned about the harsh effects of the interest rate differential, which imposes a higher interest rate on tax underpayments (or deficiencies) than the rate imposed on overpayments (or refunds). Last year, Congress revised the interest charges to permit a taxpayer to net the periods in which it has both an overpayment and an underpayment. The rule...