TEI remains focused on corporate tax shelters.

• Position: Tax Executives Institute

Comments on Proposed Regulations, Draft Legislation

Tax Executives Institute's efforts to shape any regulatory or legislative solution to so-called corporate tax shelter abuses continued unabated this summer. In June, the Institute submitted comments and testified on proposed regulations aimed at identifying and curbing tax-motivated transactions. In July, the Institute submitted comments on draft legislation developed by the staff of the Senate Finance Committee.

Proposed Disclosure Regulations

In a June 20 hearing on the proposed regulations before the Internal Revenue Service, Philip G. Cohen, chair of both TEI's Federal Tax Committee and the Institute's Corporate Tax Shelters Task Force, stated that the proper approach to addressing shelter transactions is to enhance disclosure requirements. "By homing in on the characteristics of `confidential corporate tax shelters' and requiring enhanced disclosure of such transactions," Mr. Cohen said, "the IRS can properly focus its examination and guidance resources on questionable transactions, including those undertaken by non-CEP taxpayers." TEI supports the underlying purposes of these regulations and commends the government for taking the steps necessary to give effect to the tax shelter registration rules of section 6111 and for crafting new disclosure rules compelling taxpayers to highlight transactions to be scrutinized, he added.

In addition, the TEI spokesman endorsed the government's effort to avoid pejorative labels in the disclosure rules. "References to `listed' and `reportable' transactions are less likely to taint the examination process than references to `confidential tax shelters' or `potentially abusive tax shelters,'" Mr. Cohen said.

TEI's testimony identified several concerns with the proposed regulations. The rules themselves are overbroad, Mr. Cohen said, and risk "impairing, perhaps even paralyzing, the day-to-day administration of examinations, especially in the coordinated examination program where taxpayers are subject to continuous audits." The Institute's written comments on the regulations, which were filed with the IRS on June 5, are reprinted in this issue, beginning on page 307.

Preliminary Staff Discussion Draft

On July 20, TEI commented on the Finance Committee's preliminary staff discussion draft on corporate tax shelters, which was released by the committee in late May. The Institute began by commending the Finance Committee for the process it had adopted. "If...