The "secretarial list" requirement of pending penalty legislation, June 14, 1989.

• Position: Tax Executives Institute letter filed with Congressman J.J. Pickle

The "Secretarial List" Requirement of Pending Penalty Legislation

June 14, 1989

In our testimony before the Subcommittee on Oversight on June 6, Tax Executives Institute endorsed the enactment of H.R. 2528, Improved Penalty Administration and Compliance Tax Act, and urged the Subcommittee to adopt several refinements that, we believe, will contribute to a fairer, simpler, and more equitable system of civil tax penalties. We commend the Subcommittee for its excellent work to date on this important project and pledge our continued support.

Summary

The purpose of this letter is to underscore the Institute's support for the provision of H.R. 2528 that would require the Secretary of the Treasury to prescribe (not less than annually) a list of positions affecting a significant number of taxpayers for which the Secretary believes there is not substantial authority. (The requirement would be set forth in new section 6662(d)(2)(D) of the Internal Revenue Code.)

TEI recommends that this "Secretarial list" proposal be included in the final legislation and that taxpayers be permitted to rely on the list because -

* the Secretarial list will give recognition to the mutual obligations of taxpayers and the government to ensure the integrity of our self-assessment tax system.

* the Secretarial list will not "stack the deck" against the IRS but rather will ensure, as you noted during the June 6 hearing, that penalties are "targeted only to culpable conduct."

* the Secretarial list will further the creative interaction of the Code's substantial understatement and negligence provisions.

Because a number of witnesses (including those from the Administration) questioned the efficacy of including the Secretarial list requirement in H.R. 2528, we are writing both to affirm our support for the requirement and to explain why we believe the purposes of the bill can be furthered by according taxpayers the right to rely on the list.

Purpose of the Secretarial List

The required publication of a list of positions in respect of which the IRS does not believe there is substantial authority is fully consistent with the principle that the government has an affirmative obligation to assist taxpayers in ensuring compliance with the tax laws. We applaud the Subcommittee for concluding that the government must share the obligation of maintaining the integrity of our self-assessment tax system.

To restore balance to the mutual obligations of taxpayers and the government, TEI...