Service Industry Noncompliance Initiative.

On April 9, 1993, Tax Executives Institute submitted the following comments to the U.S. Department of the Treasury concerning the Clinton Administration's proposal to impose information reporting requirements in respect of payments to corporate service providers. The Institute's comments took the form of a letter from TEl President Bob Perlman to James Fields, acting Assistant Treasury Secretary for Tax Policy. The letter was prepared under the aegis of the Institute's Payroll and Other Federal Taxes Subcommittee, which is chaired by Clifford H. Omo of Mobil Administrative Services Company.

I am writing to follow up on your comments at TEI's recent Midyear Conference concerning the Administration's Service Industry Noncompliance Initiative (SINC). We greatly appreciated your willingness to address the conference and the opportunity you provided us to express TEI's continuing concerns about SINC, to explore various ways in which both payer and payee burden can be minimized, and to consider other ways of assisting the Administration in addressing the issue of nonreporting and underreporting in the service industry.

In your remarks to the conference, you said the Administration is interested in exploring whether a workable large payee or small payer exception (or both) could be developed, or other changes adopted, to make the corporate information reporting initiative more administrable and less burdensome. TEl remains at the ready to assist in trying to make SINC work. At the same time, we would be less than candid if we did not continue to communicate our members' significant concerns about the administrative burdens that SINC would spawn in its current form.(1)

Following our discussions with you, John Devlin of the IRS, and Marty Morris of the staff of the House Government Operations Subcommittee, we have developed several possible modifications to SINC, which we believe should be considered in fine-tuning the proposal:

* Disclaimer of Reconciliation. Although the IRS has

generally disclaimed any intention of requiring cor-

porate payees to reconcile amounts reported on cor-

porate information returns to their corporate tax re-

turns, the corporate community remains very much

concerned about the burden any such reconciliation

program would spawn. The Administration should

formally confirm that reconciliation is not part of

SINC, for example, through the inclusion of appropri-

ate language in the Treasury Department's detailed

explanation of...