Of tax shelters, e-filing, and positioning TEI in a tax world of grays.

• Author: McCormally, Timothy J.

One of the challenges of working in a world of grays is determining when you should frame your position as "yes, but" or "no, but." For example, a number of years ago as Congress, the Treasury Department, and the Internal Revenue Service launched their attacks on BOSS transactions and other so-called tax shelters, TEI was faced with three choices:

* Deny that any misconduct was occurring--that is to say, when presented with a "black or white" choice, embrace an emotionally satisfying "white, no problem here" position to counter the government's "black, the tax world as we know it is coming to an end" approach.

* Acknowledge that while some problems may exist, they had been significantly exaggerated and, in any event, were not the result of wilful misconduct but rather of the government's failure to provide clear standards, and accordingly only grudgingly accept that some changes might be appropriate--that is to say, a "no, but" approach

* Acknowledge that some problems exist and therefore that palliative action was appropriate but caution that the government (and media) should not overact to any transgressions--that is to say, a "yes, but" approach.

A fourth option existed, too: To do nothing, but for a group like TEI it was a choice only in the same way that Thomas Hobson, a stable owner in England, gave his potential customers a choice--the horse by the door or no horse at all. To be relevant, you have to engage. TEI did.

It can be argued that there is little substantive difference between the "yes, but" and the "no, but" approaches--in each case, you're proposing changes to the government's "black is black" position. Experience teaches, however, that a "yes, but" approach may ultimately yield better results or, at least, a better public reaction. In other words, by acknowledging that something should be done, you stand a better chance of securing "a place at the table" and, at the end of the day, being viewed as playing a constructive role in the process.

The "no, but"/"yes, but" dilemma came to mind recently in respect of TEI's activities on corporate e-filing. Following the September 15 extended filing deadline for 2005 Forms 1120, TEI sent a survey to its members about their companies' experience with the IRS's e-filing mandate (more about the results below), and one member took the Institute to task, as follows:

Things went great [for my company]. However, I am disappointed in the fact that TEI was so resistant to change. We need to...