TEI's comments to IRS Oversight Board: on September 19, 2006, TEI Internation President David L. Bernard filed comments with Raymond T. Wagner, Jr., Chair of the IRS Oversight Board.

Background

Tax Executives Institute was established in 1944 to serve the professional needs of in-house tax practitioners. Today, the Institute has 53 chapters in the United States, Canada, Europe, and Asia. Our 6,000 members are accountants, attorneys, and other business professionals who work for 2,800 companies; they are responsible for conducting the tax affairs of their companies and ensuring their compliance with the tax laws. TEI represents the business community as a whole, and our members deal with the tax code in all its complexity, as well as with the Internal Revenue Service, on almost a daily basis. TEI is dedicated to the development and effective implementation of sound tax policy, to promoting the uniform and equitable enforcement of the tax laws, and to reducing the cost and burden of administration and compliance to the benefit of taxpayers and government alike.

The companies that employ TEI's members have almost without exception been assigned to the IRS's Large and Mid-Size Business (LMSB) Division. The largest 1,600 taxpayers within LMSB are subject to ongoing audits as part of the Coordinated Industry Cases (CIC) program. The Institute's comments are largely based upon our experience with this segment of IRS operations.

The IRS's Strategic Goals

Approved by the IRS Oversight Board in May 2004, the IRS's strategic plan for 20042009 identifies three strategic goals for guiding the agency's direction:

* Improve Taxpayer Service;

* Enhance Enforcement of the Tax Law; and

* Modernize the IRS through its People, Processes, and Technology.

The IRS has proposed the following five measures and target values that it believes should be used to evaluate progress in achieving its three strategic goals:

E-File Rate

This e-filing proposed measure is defined as the percentage of all major tax returns filed electronically by individuals, businesses, and tax-exempt entities. Under the proposal, the target date for reaching an 80-percent e-file rate would be moved from 2007 to 2012.

TEI supports the goal of increasing the participation rate for electronically filed returns. Further, we agree that a properly designed and implemented e-filing process will advance key IRS objectives, namely, reducing errors, speeding processing, and enhancing enforcement of the tax law.

At this juncture, however, it appears that the benefits of e-filing for businesses inure primarily to the government, while imposing significant implementation costs on business. The IRS needs to make the benefits of e-filing a reality for corporate taxpayers.

TEI recognizes that this measure is directed primarily at individual taxpayers. Large business taxpayers are now required to file their returns electronically. In January 2005, the IRS issued a mandate for large corporations to e-file their 2005 tax returns. Although TEI had concerns about the manner in which the requirement was implemented, the Institute worked diligently with the IRS to make the mandate more administrable. The requirement seriously burdened taxpayers and software providers, consuming enormous resources. In short, corporate taxpayers will realize little benefit from the e-filing mandate this year, notwithstanding the significant additional cost and effort that have been required. The IRS must demonstrate that e-filing will reap rewards to business taxpayers by streamlining forms, providing more efficient audits, and eliminating...