Proposed restriction on attorney-client privilege for communications relating to corporate tax shelters.

On June 23, 1998, Tax Executives Institute submitted the following comments to the House-Senate conferees reviewing H.R. 2676, the IRS Restructuring and Reform Act of 1998.

As President of Tax Executives Institute, I am writing to express the Institute's concern about the deleterious effects of the proposed constriction of the attorney-client privilege in respect of corporate taxpayers. The proposal, recently announced as part of the House-Senate tentative conference agreement on pending legislation to restructure and reform the Internal Revenue Service, would provide that no privilege will attach to "communications relating to corporate tax shelters." TEI strongly urges Congress to defeat the proposal, which would upend centuries of well-founded legal experience, effectively overturn a unanimous decision of the Supreme Court of the United States confirming the application of the attorney-client privilege to corporations, and inject significant additional uncertainty into the tax law.

Background

Tax Executives Institute is a professional association of corporate tax executives. Our 5,000 members are accountants, attorneys, and other business professionals who work for the largest 2,800 companies in North America; they are responsible for conducting the tax affairs of their companies and for ensuring their compliance with the tax laws. TEI members deal with the tax laws and with the Internal Revenue Service on almost a daily basis, and the Institute believes that the professional training and experience of our members enable the Institute to bring an important and balanced perspective to the issues involved in efforts to restructure and reform the IRS.

Discussion

The House and Senate versions of the IRS restructuring bill each contain provisions that would create a privilege of confidentiality in respect of communications between taxpayers and their (nonattorney) tax advisers who are admitted to practice before the IRS. The purpose of the provision is to accord taxpayers dealing with accountants and enrolled agents the same confidentiality that they would enjoy if they were dealing with attorneys. Although the expanded privilege (which would apply in respect of civil tax matters involving taxpayers satisfying certain net worth requirements) raises numerous questions, its thrust is undeniable: to enhance the ability of qualified taxpayers to deal with their advisers on a confidential basis. As announced by the conference leaders on the IRS...