Tax Executives Institute-Department of the Treasury Liaison Meeting agenda February 16, 1990.

Tax Executives Institute - Department of the Treasury Liaison Meeting Agenda

On February 16, 1990, Tax Executives Institute held its annual liaison meeting with official of the Department of the Treasury's Office of Tax Policy. The Treasury's delegation to the liaison meeting was chaired by Kenneth W. Gideon, Assistant Secretary of the Treasury for Tax Policy, and included Philip Morrison, International Tax Counsel; Robert Wootten, Tax legislative Counsel; Harvey Rosen, Deputy Assistant Secretary for Tax Analysis; Lowell Dworin, Director, Office of Tax Analysis; Peter Barnes, Associate International Tax Counsel; and Gregory Jenner, Special Assistant to the Assistant Secretary for Tax Policy. The Institute's delegation was chaired by TEI President William M. Burk, and included members of the Executive Committee, the chairs of the Federal, International, and IRS Administrative Affairs Committees, and members of the Institute's professional staff. The agenda is reprinted below. (Many of the items on the agenda were also included on the agenda of the Institute's January 25, 1990, liaison meeting with the staff of the Joint Committee on Taxation. That agenda was reprinted in the January-February issue of The Tax Executive (beginning on page 27). Rather than reprinting those items, there are cross-references to that earlier agenda).

Table of Contents

I. Introductory Comments

1. Overview: Does a Constituency Exist for

   Tax Simplication? 121

2. Identifying and Adhering to Governing

   Principles 121 C. Improving the Tax Legislative Process 121 D. The Proper Target of Enhanced Compliance

   Measures 121 E. Conclusion 121 II. Legislative and Policy Initiatives

1. Corporate Estimated Taxes 121

2. Foreign Tax Credit: Carryback and Carryforward

   Rules 121

3. Corporate Capital Loss Carryforward

   Period 122

4. Foreign Tax Credit: Dividends from Noncontrolled

   Foreign Subsidiaries 122

5. Foreign Tax Credit: Creditability Against

   Alternative Minimum Tax 122

6. Alternative Minimum Tax: Net Operating

   Loss Offset 122 G. Interest Allocation Rules 122 H. Passive Foreign Investment Companies 122 I. Foreign Tax Credit: Foreign Loss

   Recapture Rules 122

10. Foreign Tax Credit: "Quickie" Refunds

    Attributable to FTC Carrybacks 122

11. Foreign Tax Credit: Translation of

    Deemed-Paid Foreign Taxes 122

    L. Capitalization of Interest in the Foreign

    Context 122

13. Alternative Minimum Tax: ACE

    Preference - Foreign Source Income 122

14. Definition of Compensation for Employee

    Benefit Purposes 122 O. Environmental Tax 122 P. Business Document Matching: Corporate

    Information Returns 122

    III. Regulatory Initiatives

1. Foreign Sales Corporations 122 1. Estimated Tax Rules 122 2. Notice 89-94: Applicability to FSCs 123 B. Section 6114: Disclosure of Treaty-Based

   Returns Positions 123

3. Section 864(e): Interest Allocation - Transition

   Rules 124 D. Section 954(b)(4): High-Tax Exception 125 E. Notice 89-91: Allocation of Charitable

   Contributions 125

6. Rev. Rul 89-73: Treatment of Short-Term

   Loans under Section 956 126

7. Section 865(j)(1): Sourcing of Capital

   Losses 126

8. Section 954: Personal Holding Company

   Income - Treatment of Foreign Exchange

   Transactions 127 I. Leased Employees 127 IV. Status Reports

1. Section 861: Sourcing of State Income

   Taxes 127

2. Section 905(c): Notice of Redetermination

   of Foreign Tax 128 C. Section 864(e): The CFC Netting Rule 128 D. Section 482 White Paper 129 E. Sections 44 and 174: Research and

   Experimental Expenditures 129

6. Section 864(e): Integrated Financial

   Transactions 129 G. Section 125: Cafeteria Plans 130 H. Section 166: Bad Debt Expense 130 I. Introductory Comments

1. Overview: Does a Constituency

   Exist for Tax Simplifications?

   [See Item No. I.A. of the TEI-Joint Committee Liaison Meeting Agenda, reprinted in the January-February 1990 issue of The Tax Executive.]

2. Identifying and Adhering to

   Governing Principles

   [See Item No. I.B. of the TEI-Joint Committee Liaison Meeting Agenda, reprinted in the January-February 1990 issue of The Tax Executive.]

3. Improving the Tax Legislative

   Process

   In addition to proposals to simplify specific provisions of the Internal Revenue Code, TEI submits that more attention must be focused on the process by which highly complex - and complicated - legislation is enacted. As explained more fully in the Institute's February 7 testimony before the House Ways and Means Committee, TEI believes that greater emphasis should be placed on the administrability of particular proposals during the legislative process. Safeguards must be built into the system.

   The most effective safeguard would be the time to analyze and focus on specific provisions and on their administrability. To this end, TEI recommends the following:

   1. IRS Testimony on Administrability of Legislative Proposals. The IRS should be asked to testify before Congress specifically to address the administrative aspects of proposed tax legislation. The testimony should address the following issues:

      * the ability of the IRS to administer

      the provisions and the

      estimated cost to the IRS of

      doing so; and

      * the ability of taxpayers to

      comply with the provision and

      the estimated cost to taxpayers

      of doing so.

   2. Early Availability of Draft Legislative Language. A greater effort should be made to prepare draft legislative language in advance of hearings and mark-up sessions to allow the discovery and correction of administrative flaws before the legislation becomes law. In this regard, the Treasury Department should routinely draft statutory language to implement the Administration's tax proposals. Such a step would not only facilitate the integration of different provisions and minimize the enactment of redundant provisions, but would also substantially reduce the need for massive technical corrections.

   3. Development of Pre-Enactment Forms and Schedules. In appropriate cases, the IRS should develop necessary tax forms and schedules before a proposal is enacted. Administrability can be measured in many ways, but perhaps the most vivid and immediate picture is painted by the forms and schedules required to "translate" a statutory provisions into the real world. If substantive provisions were not enacted until the IRS developed any necessary forms, Congress could make an informed decision whether the policy underlying the proposal was sufficiently important to justify the imposition of the attendant compliance burden.

4. The Proper Target of Enhanced

   Compliance Measures

   [See Item No. I.C. of the TEI-Joint Committee Liaison Meeting Agenda, reprinted in the January-February 1990 issue of The Tax Executive.]

5. Conclusion

   In the succeeding sections of this agenda, TEI discusses several areas that it believes merit attention as efforts continue to simplify or improve the Internal Revenue Code and regulations. Taxpayers and government representatives may not always agree (with each other or among themselves) on how particular provisions should be simplified or where concerns of "equity" or "fairness" or revenue should override the simplification objective. TEI remains convinced, however, that progress can be made.

   II. Legislative and Policy

   Initiatives

1. Corporate Estimated Taxes

   [See Item No. IV.A. of the TEI-Joint Committee Liaison Meeting Agenda, reprinted in the January-February 1990 issue of The Tax Executive.]

2. Foreign Tax Credit: Carryback

   and Carryforward Rules

   [See Item No. II.A. of the TEI-Joint Committee Liaison Meeting Agenda, reprinted in the January-February 1990 issue of The Tax Executive.]

3. Corporate Capital Loss

   Carryforward Period

   [See Item No. III.B. of the TEI-Joint Committee Liaison Meeting Agenda, reprinted in the January-February 1990 issue of The Tax Executive.]

4. Foreign Tax Credit: Dividends

   from Noncontrolled Foreign

   Subsidiaries

   [See Item No. II.C. of the TEI-Joint Committee Liaison Meeting Agenda, reprinted in the January-February 1990 issue of The Tax Executive.]

5. Foreign Tax Credit:

   Creditability Against

   Alternative Minimum Tax

   [See Item No. II.D. of the TEI-Joint Committee Liaison Meeting Agenda, reprinted in the January-February 1990 issue of The Tax Executive.]

6. Alternative Minimum Tax:

   Net Operating Loss Offset

   [See Item No. III.D. of the TEI-Joint Committee Liaison Meeting Agenda reprinted in the January-February 1990 issue of The Tax Executive.]

7. Interest Allocation Rules

   [See Item No. II.H. of the TEI-Joint Committee Liaison Meeting Agenda, reprinted in the January-February 1990 issue of The Tax Executive.]

8. Passive Foreign Investment

   Companies

   [See Item No. II.G. of the TEI-Joint Committee Liaison Meeting Agenda, reprinted in the January-February 1990 issue of The Tax Executive.]

   I. Foreign Tax Credit: Foreign

   Loss Recapture Rules

   [See Item No. II.F. of the TEI-Joint Committee Liaison Meeting Agenda, reprinted in the January-February 1990 issue of The Tax Executive.]

10. Foreign Tax Credit: "Quickie"

    Refunds Attributable to FTC

    Carrybacks

    [See Item No. II.B. of the TEI-Joint Committee Liaison Meeting Agenda, reprinted in the January-February 1990 issue of The Tax Executive.]

11. Foreign Tax Credit: Translation

    of Deemed-Paid Foreign Taxes

    [See Item No. II.E. of the TEI-Joint Committee Liaison Meeting Agenda, reprinted in the January-February 1990 issue of The Tax Executive.]

    L. Capitalization of Interest in the

    Foreign Context

    [See Item No. II.J. of the TEI-Joint Committee Liaison Meeting Agenda, reprinted in the January-February 1990 issue of The Tax Executive.]

13. Alternatives Minimum Tax: ACE

    Preference - Foreign Source

    Income

    [See Item No. III. F. of the TEI-Joint Committee Liaison Meeting Agenda, reprinted in the January-February 1990 issue of The Tax Executive.]

14. Definition of Compensation for

    Employee Benefit Purposes

    [See Item No. III.H. of the TEI-Joint Committee Liaison Meeting Agenda, reprinted in the January-February 1990 issue of The Tax Executive.]

15. Environmental Tax

    [See Item No. III.A. of the TEI-Joint Committee Liaison Meeting Agenda, reprinted in the January-February 1990 issue of The Tax...