Tax reform, changing business roles are focus of TEI's 60th annual conference.

• Position: Tax Executives Institute

More than 650 tax professionals made San Diego their port of call from October 23-26 to participate in the Institute's 60th Annual Conference. With the increasing importance of non-tax issues, numerous sessions during the three-day program focused on the Many Masters of the Tax Department, including the financial statement overseers from the FASB, SEC, and PCAOB, as well as the more traditional tax (and task) masters from Congress, the IRS, CRA, and the OECD.

The conference included timely sessions on the Sarbanes-Oxley Act, the FASB exposure draft on uncertain tax positions, tax shelter developments, efiling, and the attorney-client privilege as well as updates on Canadian developments, state and local taxes, and a host of other tax planning topics. The conference was held at the Manchester Grand Hyatt on the waterfront of San Diego harbor.

Tax Policy and Reform

The shifting winds of U.S. tax policy was the first topic of the conference, with Michael Graetz of Yale Law School and former Deputy Assistant Treasury Secretary for Tax Policy, previewing the soon-to-be-released recommendations for tax reform from the President's Advisory Panel on Federal Tax Reform.

Professor Graetz described the demographic, budget, and revenue trends confronting U.S. policymakers and outlined the principal features of the two proposals from the Advisory Panel. The first proposal--a modified income tax approach--would exempt active foreign earnings from U.S. tax and put intense pressure on the allocation of expenses to exempt and non-exempt income. In addition, certain foreign royalties would likely remain taxable.

The second proposal, he explained, would essentially be a subtractive method value added tax. Probably the sole business deduction permitted under this proposal would be wages. With the denial of deductions for interest expense, the proposal would make the taxation of financial institutions problematic. The consumption tax proposal would also require renegotiation of many international tax treaties.

Lamenting the dearth of real-world input to the Advisory Panel from tax practitioners and businesses, Mr. Graetz urged conference participants to become involved in the pending tax reform debate.

"This is a moment for the business community to intervene and to describe the tax system you would like to live with, and to explain the real-world impact of these proposals," he said. "There are great risks and great opportunities, so I hope you seize the moment."

Prospects for Reform

In the subsequent session on legislative developments, two former congressional aides echoed the call for greater business involvement in the tax reform debate.

With pressure building on Congress to balance the need...