Tax Executives Institute - U.S. Department of Treasury liaison meeting; minutes December 1, 1994.

• Position: Liaison Meeting Special

On December 1, 1994, Tax Executives Institute held its annual liaison meeting with the Assistant Secretary of the Treasury for Tax Policy and other senior representatives of the Treasury Department's Office of Tax Policy. The agenda for the liaison meeting was published in the January-February 1995 issue of The Tax Executive. The minutes of the meeting are set forth below.

1. Introduction

   On behalf of the U.S. Treasury Department's Office of Tax Policy, Assistant Secretary Leslie B. Samuels welcomed the delegation from Tax Executives Institute. On behalf of Tax Executives Institute, TEI President Linda B. Burke thanked the Treasury for meeting with the Institute.

2. Opening Remarks

   Assistant Secretary Samuels referred to the Senate vote that would take place later in the day on the Uruguay Round accord of the General Agreement on Tariffs and Trade (GATT). He observed that the Treasury has been focusing a lot of its attention on the GATT legislation and is optimistic about its passage, adding that the agreement is an "important step" for the country. (Editor's Note: The GATT legislation passed the Senate later that day.)

   With respect to forthcoming guidance, Mr. Samuels remarked that a "flurry" of regulations would be issued before the end of 1994. Treasury has tried to space out the guidance more evenly throughout the year, he said, but the process inevitably promotes year-end issuance. Mr. Iwry noted that the section 162(m) regulations, relating to the $1 million limitation on the deductibility of executive compensation, were released to the public earlier that day. It is important to issue the regulations expeditiously to enable corporations to prepare their proxy statements, he stated. Mr. Samuels noted that Rev. Rul. 94-77, relating to the deductibility of severance payments in light of the INDOPCO decision, was also issued that day.

   Mr. Samuels stated that Treasury is seeking guidance in developing a priorities list (or business plan). He invited TEI's comments on what regulatory projects should be given priority in 1995. He added that the request did not represent a "one-shot" deal; Treasury recognizes the importance of getting guidance out to taxpayers and wants to hear the Institute's comment-on particular projects and priorities generally-throughout the year. Referring to Senator Dole and Representative Gingrich's suggestion that a moratorium be imposed on the issuance of regulations, Mr. Samuels stated that the message Treasury hears is that taxpayers want more guidance. If TEI shares that view, he suggested it consider communicating its position to Congress.

   Ms. Burke noted that the liaison meeting with Treasury has been accelerated to December to permit the Institute

   to work more effectively with the Office of Tax Policy on important issues, including the setting of regulatory priorities. She referred to a recent speech by Ms. Beerbower in which she identified six fundamental issues affecting the further development of the tax law.(1) Ms. Burke agreed that the six questions raise "huge" tax policy questions adding that relevant guidance is undeniably needed in these areas, as well as in a number of other areas (including the tax provisions of the GATT accord). Finally, Ms. Burke echoed Mr. Samuels's view that the application of any rulemaking moratorium to the tax realm would be counter-productive. (Editor's Note: TEI subsequently filed comments with the appropriate committees of the 104th Congress opposing the extension of any moratorium to IRS and Treasury regulations.)

3. Improving the Legislative Process

   Ms. Burke referred to the Institute's written agenda which recommends ways to improve the legislative process. She questioned the efficiency and fairness of the process used to develop funding proposals for the GATT accord, which was marked by skeletal descriptions of proposed changes and media reports on what was (and was not) adopted and why. She suggested that the truncated process presents a prime example of how legislation should not be developed.

   Mr. Samuels acknowledged that the GATT process was less than optimal and said that Treasury, too, is unhappy with the overall process. He explained that the GATT funding proposals represent a "special situation," especially given the "fast-track" rules Congress adopted in respect of the trade accord. Referring next to the Institute's submissions on three funding proposals, Mr. Samuels assured TEI that its views were taken into account as the process moved forward.(2) The points TEI made were thoroughly discussed, he stated. Although he believed it would be "unusual" to use the same process again, Mr. Samuels conceded that he cannot predict the future of the "fast-track" or "pay-as-yougo" process. (The same procedure was used in respect of the North American Free Trade Agreement, but nothing is on the horizon calling for the use of the fast-track procedure.) Treasury understands taxpayers' concerns with both the proposals and the process itself, he said and reiterated that comments on the GATT funding proposals were fully "vetted" by the Administration and the committee staff.

   Ms. Burke emphasized the need for Treasury and taxpayers to work together to develop a process to produce better results, as well as a strategy for ensuring that proposals impairing principles of sound tax policy and administration are either rejected or revised. Mr. Murphy noted that when NAFTA was considered stakeholders were more fully brought into the process, and positive changes were made as a result.

   Mr. Samuels said he felt compelled to defend the GATT legislative process. He explained that the GATT funding proposals were developed on a bipartisan basis. The Treasury staff and congressional aides were well aware of the pros and cons of the proposals, he said, adding that the Republican leadership signed off on the funding mechanisms. Ms. Burke reiterated that many companies supported the GATT, but TEI believes that issues of administrability and compliance should be given more attention. She concluded that the Institute wants to ensure that the rules work in the "real world."

4. Improving the Tax Treaty Process

   Ms. Burke noted that the Institute's biggest concern with the treaty process is the level of taxpayer participation. She specifically referred to Treasury's recent submission of seven tax treaties and protocols for Senate approval.(3) She observed that the Institute has urged the Senate to ratify the accords, but believes earlier taxpayer involvement would not only improve the final product, but facilitate the ratification process (by building a solid foundation of support).

   Mr. Bergquist confirmed TEI's desire to become more involved in, and be more supportive of, the tax treaty process. He predicted the business community would be more supportive of pending treaties if it had more...