Streamlining corporate filing requirements.

On August 29, 1995, Tax Executives Institute submitted the following comments to William Zachery, IRS Assistant Examination Chief in Atlanta, and Sharon Lovell, IRS Director, Corporate Specialties in Washington, who co-chair an Internal Revenue Service workgroup on streamlining corporate filing requirements and developing a business case for electronic filing of Form 1120. The comments were developed under the aegis of TEI's IRS Administrative Affairs Committee and Tax Information Systems Committee, which are chaired respectively by Robert L. Ashby of Northern Telecom, Inc. and Bill Zornes of Western Auto Supply Company. Messrs. Ashby and Zornes met with the IRS workgroup on August 21. The following members of the Institute also contributed to the development of the Institute's submission: Robert D. Adams of Halliburton Company; Sheldon A. Kimel of Brunswick Corp.; Louis J. Manetti of Bell & Howell Co.; Lonnie Nicol of the Aluminum Company of America; Donald L.R. Ouimet of IVAX Corp.; Jeffrey D. Peterson of AFG Industries, Inc.; Mark C. Silbiger of Sherwin-Williams Company; Joseph Von Der Vellen of Kohler Co.; and Barbara S. Walker of The Stop & Shop Companies.

On behalf of Tax Executives Institute, I am pleased to submit the following comments to the Internal Revenue Service's Corporate Return Streamlining and Electronic Filing Workgroup. Tax Executives Institute supports the objectives of the workgroup (1) to streamline the current filing requirements for Form 1120 -- Corporation Income Tax Return, and (2) to support the planned development of corporate electronic filing systems. TEI appreciated the opportunity to meet on August 21 with Tom Wilson, Sharon Lovell, and other members of the workgroup to provide the Institute's preliminary comments and recommendations concerning the streamlining efforts. In this letter, we summarize those comments and our recommendations.

Background

Tax Executives Institute is a volunteer, professional association of approximately 5,000 accountants, lawyers, and other professionals who are responsible for managing the tax affairs of their companies. The Institute is firmly committed to maintaining a tax system that works -- both for taxpayers and tax administrators. TEI represents a cross-section of the in-house business tax community, including most of the companies that are examined as part of the Coordinated Examination (CIMP) Program, as well as numerous non-CEP taxpayers. Our members must contend daily with the tax law's myriad and complex recordkeeping, compliance, and filing requirements. We believe the diversity, training, and experience of our members enable us to bring a uniquely balanced and practical perspective to your attention. We look forward to working with the workgroup in reducing the cost and burden of tax administration and compliance to the mutual benefit of taxpayers and the government.

General Comments

Perhaps more than any other stakeholder group, TEI knows the price -- in financial terms and in terms of opportunity costs -- of today's filing requirements. Hence, we strongly believe that the first inquiry of the workgroup should be whether particular filing requirements or procedures "add value." Despite the synergies that undeniably exist between a corporation's compliance and planning functions, the compliance activities of corporate tax departments are properly viewed as "overhead." As such, every effort should be made to minimize the burden on taxpayers and to ensure that the burdens that are imposed further the IRS's goal of ensuring compliance with the tax laws.

Accordingly, TEI is very much interested in working with the IRS in streamlining corporate filing requirements. We believe there is much to be accomplished in both the short and the long term from the workgroup's efforts. During our meeting on August 21, we were advised that there is little likelihood that any changes recommended by the workgroup could be implemented in time for the 1996 filing season (i.e., the filing of 1995 returns), because of the long lead time required to revise, review, print, and disseminate the forms, schedules, and attendant instructions. Even if the short term is frustratingly long, however, it should not dissuade the workgroup from expeditiously recommending bold action. Indeed, it should impel the group to redouble its efforts, for if the process is never begun, it will never culminate in positive change. In this regard, too, we urge the group to resist calls to defer action until the shape of fundamental tax reform becomes clear, since the outcome of that debate is likely not to be known until well into 1997 (if then). Because of the incremental benefits that can accrue from streamlining corporate filing requirements (even in the face of anticipated, yet still inchoate, changes), we urge the workgroup to proceed apace.

We caution, however, that taxpayers and the IRS have come this way before. In connection with a 1991 strategic initiative, Balancing Efficiency and Effectiveness (BEE)-12, to improve tax forms and publications, Tax Executives Institute's Philadelphia Chapter (among others) submitted a number of thoughtful recommendations to the IRS. The recommendations were compiled in an excellent report, and yet more than four years after the BEE-12 report was filed, few of the recommendations have been implemented. Why did they languish? Were they too ambitious? Were they too idealistic? We do not know, but submit that the answer should be found before asking internal and external stakeholders to devote considerable time and effort to developing detailed recommendations. We also submit that, given current political resonance of government reinvention efforts, what might have seemed too bold in 1991 could be squarely in the mainstream in 1995.

Candor requires us to report that many taxpayers are concerned that the costs of switching to a new system may outweigh the benefits. We recommend that the workgroup, with equal candor, acknowledge that substantial transition costs will, of necessity, be imposed by changing corporate filing requirements. The IRS must understand that for many (if not most taxpayers) change is disruptive and not particularly welcome, even if it is ultimately for the better. This is because corporations -- perhaps especially the large-case taxpayers that constitute the bulk of TEI's membership -- currently contend with the overwhelming reporting burdens of current law. They have acquired or developed the computer programs, the internal procedures, and the skilled personnel required to comply. They have committed the resources to cope with the current regime. Thus, although they collectively agree that corporate filing requirements can be efficaciously changed, they also know from experience that every change will impose a cost. They thus need assurance that the effect of the changes will be balanced -- not only providing the IRS with the required information in a format that makes it easier for the IRS, but also...