TEI urges IRS to clarify CCA 201234027 on eligibility of milestone payments for Rev. Proc. 2011-29 safe harbor.

• Position: Tax Executives Institute

On January 18, 2013, Tax Executives Institute submitted a letter to Acting Commissioner of Internal Revenue Steven T. Miller and Chief Counsel William Wilkins, urging the IRS to revisit the interpretation of CCA 201234027 and the application of Rev. Proc. 2011-29 safe harbor to milestone payments paid to investment bankers in connection with certain corporate transactions. The Institute's comments were prepared under the aegis of its Federal Tax Committee, whose chair is Robert L. Howren of BlueLinx Corporation. Jeffery P. Rasmussen of the Institute's legal staff coordinated the preparation of the comments.

On August 24, 2012, the Internal Revenue Service released Chief Counsel Advice 201234027 (hereinafter "the CCA'), relating to the treatment of milestone payments made to investment bankers in advance of, and creditable against, the final fee for certain corporate transactions. On behalf of Tax Executives Institute, I am pleased to submit the following comments on the CCA.

Background on Tax Executives Institute

Tax Executives Institute is the preeminent international association of in-house business tax executives with 7,000 members representing 3,000 of the leading corporations in the United States, Canada, Europe, and Asia. TEI represents a cross-section of the business community, and 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 the government alike. As a professional association, TEI is firmly committed to maintaining a tax system that works--one that is administrable and with which taxpayers can comply.

Members of TEI are responsible for managing the tax affairs of their companies and must contend daily with the provisions of the tax law relating to the operation of business enterprises. We believe that the diversity and professional training of our members enable us to bring a balanced and practical perspective to the issues raised in Chief Counsel Advice 201234027.

Treatment of Facilitative Fees Paid for Acquisitions

Under Treas. Reg. [section] 1.263(a)-5, amounts paid to facilitate a business acquisition or reorganization must be capitalized. Such costs include borrowing costs as well as costs paid in the process of investigating or otherwise pursuing the transaction. Costs that facilitate a "covered transaction" must be...