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Registration, Listing and Disclosure of Potentially Abusive Corporate Tax Shelters The Treasury issued temporary regulations mandating registration, listing and disclosure of tax shelters and certain other tax-motivated transactions, in an attempt to recoup an annual revenue loss estimated at anywhere from $3.3 billion to $30 billion. The AICPA testified before the Senate on the corporate tax shelter issue and submitted written comments on the regulations. This article explains the new rules and the AICPA's perspective. Roby
B. Sawyers, Ph.D., CPA
Editor's note: Dr. Sawyers formerly worked with the AICPA Tax Division's Corporate Tax Shelter Task Force. For more information about this article, contact Dr. Sawyers at (919) 515-4443 or Roby_Sawyers@ncsu.edu .
Executive Summary
Earlier this year, Treasury issued three sets of temporary and proposed regulations (under Secs. 6011, 6111 and 6112) on corporate tax shelters.1 As described by Treasury, "the three regulations are designed to provide the Service with better information about tax shelters and other tax-motivated transactions through a combination of registration and information disclosure by promoters and tax return disclosure by corporate taxpayers."2 The regulations are the latest round in the continuing debate among Treasury, Congress and the practitioner community (as represented by the AICPA, the American Bar Association (ABA) Section of Taxation, Tax Executives Institute (TEI) and others) concerning the "problem" of corporate tax shelters and the best approach to addressing them.
Backgound In February 1999, the Clinton administration offered 16 proposals aimed at shutting down abusive tax shelters, as part of the revenue provisions in the President's fiscal year 2000 budget.3 Congressional hearings on the issue were held in March and April 1999. In July 1999, Treasury and the Joint Committee on Taxation (JCT) each issued "white papers" addressing the issue, followed by another round of Congressional hearings in the fall. Throughout 1999, the issue was hotly debated in the press, Congressional hearings and other forums by the ABA, the New York State Bar Association, the AICPA, TEI and the "Big Five" accounting firms. The debate has continued into 2000; Treasury released regulations and the Senate Finance Committee held hearings. In late May, the Senate Finance Committee staff released a discussion draft, recommending increased penalties on corporations that engage in corporate tax shelters and enhanced disclosure by corporations and promoters, and prohibiting tax opinion writers from providing opinions on transactions in which they participate or otherwise have an interest.4
What Is a Corporate Tax Shelter? Under current law, an arrangement is treated as a corporate tax shelter under Sec. 6111(c) if it has as a significant purpose the avoidance or evasion of Federal income tax. Although difficult to define, Treasury's white paper identified a number of common characteristics of tax shelters, including lack of economic substance, inconsistent financial ac-counting and tax treatment, use of tax-indifferent parties (including foreign entities and tax-exempt entities), active marketing by promoters, use of confidentiality agreements by promoters, use of contingent fees or insurance arrangements and high transaction costs.5 In addition, a number of transactions have been determined by Treasury to be "tax avoidance transactions."6 Examples include transactions involving contingent installment notes (CINs), lease-in, lease-out arrangements and debt straddles.
Extent of the Problem It is difficult to quantify the extent of the tax shelter problem. In a report, the JCT stated that "although economic information concerning the cost of tax shelters is largely anecdotal, some believe that the resulting revenue loss may be in excess of $10 billion a year."7 Using evidence from three recent high-profile shelter cases8 and 123 known related cases, the JCT estimates that over $7 billion of disputed tax dollars is at stake.9 Based on an analysis of decreases in the ratio of corporate taxes to corporate profits from 19941999, others have estimated the shortfall to range from $13 billion$24 billion.10 Using another approach based on estimated tax shelter fees paid to promoters, the annual revenue loss has been estimated between $3.3 billion and $30 billion.11 Some argue that current law is sufficient to address abuses12 and that the IRS's recent victories in court evidence that. However, most agree that corporate tax shelters are a serious problem, current law is inadequate to address it and a viable solution must extinguish shelters before they are entered into, rather than relying on detection through current means or legislation that attempts to attack specific transactions.
Treasury and JCT Proposals The Treasury and JCT white paper recommendations hinge on additional disclosure requirements and increased penalties. Both would effectively codify the economic substance doctrine by requiring a comparison of the present values of expected pre-tax profits and tax benefits in determining whether an arrangement has as a significant purpose the avoidance or evasion of Federal income tax.
Disclosure Disclosure of transactions to the IRS should make detection easier and alert the IRS and Treasury to potential questionable transactions early. According to the JCT, "disclosure should function as an 'early warning device' providing notice to Treasury of a potential gap or inconsistency in the tax law that warrants attention."13 Treasury argues that greater disclosure to the IRS should also discourage corporations from entering into questionable transactions, by changing the cost/benefit analysis.14 Both the Treasury and JCT proposals call for advance disclosure to the IRS—pre-return disclosure by the taxpayer or promoter and/or disclosure on the taxpayer's return. The proposals differ as to which transactions would trigger disclosure, and on disclosure form and timing. The JCT recommends disclosure of transactions meeting certain "indicators," including those (1) causing permanent book-tax differences, (2) involving contingent fee or tax indemnity arrangements, (3) involving a tax-indifferent party, (4) failing a pre-tax profits test (i.e., expected pre-tax profits are insignificant compared to expected net tax benefits) and (5) in which the corporate participant incurs little additional economic risk. Treasury's proposal recommends the use of "filters" that a transaction must meet to require disclosure, including a combination of book/tax differences in excess of certain thresholds; a recision clause or unwind provision; insurance or similar arrangements for the anticipated tax benefits; involvement of a tax-indifferent party; adviser fees in excess of certain amounts; contingent fees; confidentiality agreements; offering of a transaction to multiple corporations; and a difference between the form of a transaction and how it is reported. Both proposals recommend that any disclosure by the taxpayer be signed by a senior financial officer or another corporate officer having knowledge of the facts.
Penalties Under current law, tax adviser opinions obtained or issued by a tax shelter promoter are used by taxpayers to avoid 20% substantial underpayment penalties under the "more likely than not" standard. Due to ambiguities in the law and the subjective nature of the standard, it is relatively easy for shelter promoters to write these opinions to meet the more-likely-than-not standard or to obtain them from others (sometimes even "opinion shopping" to more than one CPA or law firm).15 In general, the Treasury and JCT white paper proposals would increase underpayment penalties to 40%, with a reduction to 20% for disclosure and "substantial authority" or "more likely than not" support. Treasury would eliminate the 20% penalty with disclosure and a strengthened reasonable cause standard; the JCT would repeal the current reasonable cause exception and replace it with a disclosure requirement and a 75% "highly confident" likelihood that the tax treatment would be sustained on its merits. The Treasury and JCT recommendations also provide for enhanced or new penalties on other parties (e.g., promoters, advisers and tax-indifferent parties) and recognize the need to amend Circular 23016 to expand its scope and provide more meaningful enforcement measures.
AICPA Reaction The AICPA reacted to the Treasury and JCT proposals in Senate Finance Committee testimony on March 9, 2000.17
Disclosure Provisions As to disclosure requirements, the AICPA agreed that "reportable transactions" subject to tax-return disclosure should include those (1) with tax indemnity or contingency fee arrangements, (2) with confidentiality requirements and (3) involving a tax-indifferent party. However, the AICPA re- commended the replacement of the JCT's pre-tax profits test with disclosure of transactions that "would not have been entered into but for the tax benefit," arguing that this approach "tests for business purpose and economic substance at the same time and is more in keeping with other precedents in the tax code." The AICPA also suggested narrowing the book/tax difference indicator to include only transactions that Treasury identifies in regulations as requiring special disclosure. This would prevent disclosure solely for book-tax differences caused by transactions such as the acquisition of intangibles (e.g., goodwill), tax credits, incentive stock options, capital gains and losses, etc. Further, the AICPA recommended (1) the use of a de minimis rule that would eliminate return disclosure requirements for transactions with less than $10 million in tax savings or $1 million in fees and (2) that return disclosure be made in summary form, with the IRS permitted to specify (in regulations) the additional materials to be submitted to support the disclosure.18 Finally, the AICPA continued to recommend exceptions from disclosure (and penalties) for transactions germane to the conduct of the business, expected to produce pre-tax returns reasonable in relation to the costs and risks incurred or consistent with the legislative purpose of the provision.
Penalty Provisions The AICPA recommended that the substantial understatement penalty be increased on transactions that were not disclosed but reasonably should have been, and that no penalty be assessed when reportable transactions were disclosed, substantial authority exists and the taxpayer reasonably believes the position is more likely than not the correct one. Taxpayers unable to meet the more-likely-than-not requirement should be subject to the current 20% understatement penalty (even when the transaction was disclosed as required). The AICPA also recognized that penalties on advisers and promoters must be devised to more effectively deter those not subject to Circular 230. In its testimony, the AICPA supported penalties on advisers and promoters for failure to disclose reportable transactions and when a substantial underpayment penalty is assessed on a taxpayer for insufficient authority. Similarly, the AICPA supported penalties on return preparers (subject to the normal due process safeguards) when a substantial understatement penalty is imposed for failure to disclose or for insufficient authority.
Other Provisions In addition to specific recommendations on disclosure and penalties, the AICPA suggested that "focused tax administrative efforts will be required to successfully address the problem of corporate tax shelters," including the incorporation of centralized administration and review of penalties, and the use of an active process to notify taxpayers as the IRS identifies new reportable transactions.
The Regulations On Feb. 28, 2000, Treasury issued three sets of temporary and proposed regulations, on (1) registration of corporate tax shelters (Sec. 6111); (2) requirements to maintain lists of investors in potentially abusive tax shelters (Sec. 6112); and (3) tax shelter disclosure statements (Sec. 6011). The AICPA Tax Division's Tax Shelter Regulations Task Force submitted written comments on May 31, 2000, which are summarized below.19
Temp. Regs. Sec. 301.6111-2T Temp. Regs. Sec. 301.6111-2T(a)(2) requires tax shelter promoters to register (with the IRS) transactions (1) structured for a significant purpose of tax avoidance or evasion, (2) offered to corporate participants under conditions of confidentiality and (3) for which the tax shelter promoter(s) may receive fees in excess of $100,000. "Registration" includes, under Temp. Regs. Sec. 301.6111-2T(e)(2), a detailed description of the tax shelter, including structure and tax benefits, on Form 8264, Application for Registration of a Tax Shelter. Any written materials presented in connection with an offer to participate in the shelter must be submitted with the registration form. Temp. Regs. Sec. 301.6111-2T(b) identifies three categories of transactions for which the avoidance or evasion of Federal income tax is considered a significant purpose. The first category includes any "listed transaction" identified by notice, regulation or other published guidance. The second category includes transactions in which the pre-tax profit from the transaction is insignificant relative to the present value of the participant's expected net Federal income tax savings from the transaction (modified for borrowing transactions). The third category includes transactions structured to produce Federal income tax benefits that constitute an important part of the transaction's intended results and the tax shelter promoter reasonably expects the transaction to be presented to more than one potential participant. This category excludes transactions (under Temp. Regs. Sec. 301.6111-2T(b)(4)) in which the promoter reasonably determines that (1) the potential parti-cipant is expected to participate in the transaction in the ordinary course of business in a form consistent with customary commercial practice and (2) there is a long-standing and generally accepted understanding that the expected Federal income tax benefits from the transaction are allowable under the Code. Exceptions are also provided by Temp. Regs. Sec. 301.6111-2T(b)(5) for transactions (except listed transactions) in which the promoter reasonably determines that there is no reasonable basis under Federal tax law for denial of any significant portion of the expected Federal income tax benefits. According to Temp. Regs. Sec. 301.6111-2T(c)(1), the determination of confidentiality is based on all the facts and circumstances, but includes limiting the offeree's disclosure of the structure or tax aspects of the transaction (whether or not the limitation is legally binding). An offer will also be considered confidential when the promoter knows (or has reason to know) that the transaction is protected from disclosure or use in any other manner (such as when the transaction is claimed to be proprietary to the promoter or any other party other than the offeree). In determining whether fees exceed $100,000, Temp. Regs. Sec. 301.6111-2T(d) takes into account all consideration that may be received by the promoter, including contingent fees, equity interests and fees he may receive for other transactions as consideration for promoting the shelter. AICPA comments: These temporary regulations implement important rules concerning the identification of problematic "tax shelters" offered to corporate investors "under conditions of confidentiality." The rules are administratively burdensome and the terms used are broadly construed in the regulations. It is critical that this guidance apply, as the preamble states, primarily to transactions entered into by "large publicly traded companies." Therefore, the final regulations must be structured for greater leniency. In that regard, reasonable cause guidelines for abatement of penalties under Sec. 6707 for failure to register should also be developed. Sec. 6111(f)(3) authorizes the Secretary to prescribe regulations that provide "exemptions from the requirements of this section." There is urgent need for immediate guidance as to what transactions can be excepted from registration. Further, in the spirit of the registration statute, in the wise administration of these rules by the IRS and in fairness to tax practitioners, serious consideration should be given to "narrowing" the scope of the regulations. The AICPA submits that the IRS can expressly exclude transfer-pricing engagements, cost-sharing agreements, valuation matters, charitable contributions of property, rehabilitation credits, research and development (R&D) credit studies, almost every other kind of credit (except foreign tax credits), basis studies, earnings and profits studies, depreciation studies and like-kind exchanges from list maintenance and registration requirements without compromising its ability to review large, abusive transactions. The excluded items are adequately addressed in Secs. 6662(e), 6038A and other provisions. Temp. Regs. Sec. 301.6111-2T(b)(3) indicates that, to determine whether a transaction lacks economic substance, the present value of a parti-cipant's reasonably expected pre-tax profit is to be compared to the present value of the participant's expected net Federal income tax savings from the transaction. This test is workable for certain transactions involving proposed investments, but not for many completed transactions or those involving restructuring or deductions, such as compensation, advertising, rent, utilities, repairs and R&D expenditures. The regulations should, therefore, expressly limit the use of the present value test to investment transactions for which the pre-tax profits and the net tax benefits are determinable with reasonable accuracy. In addition, the regulations should clarify how present values are to be computed for test purposes. Explanations are needed as to which discount rates are to be applied, whether different rates are to be applied to the expected pre-tax profit and the expected Federal income tax savings and the time period to be used in making the calculations. The AICPA strongly recommends the use of numerous examples to help clarify the application of the present value test, as well as the calculations under the test. Further, the "conditions of confidentiality" in Temp. Regs. Sec. 301.6111-2T(c)(1) must be clarified in the final regulations. The use of phrases like "protected from disclosure or use in any other manner" is overly broad and needs clarification. An overly broad definition of "confidentiality" in the regulations could result in registration just to protect the promoter and, thus, detract from the government's ability to identify truly problematic situations. There are a number of situations or arrangements that include conditions of confidentiality, but not as contemplated by this provision. For example, compensation arrangements in which the adviser generates innovative planning ideas should not be affected, provided that there are no restrictions on dissemination of information. Also, tax opinion letters commonly include a caveat that they may not be relied on for any other transaction or by any other party. Similarly, valuation studies, software and spreadsheets that may accompany tax-planning ideas often have limits or licenses intended to avoid legal privity with unintended third-party beneficiaries. The tax opinion letter and valuation report caveats do not limit disclosure or use by the client of the tax structure or the tax aspects, but do preclude reliance on the opinion or valuation study by third parties (or by the client for another transaction). Licenses of software and spreadsheet applications do not affect the tax aspects, but their terms are needed to limit legal liability. Lastly, it is common practice to include a confidentiality statement on all e-mails and faxes to protect the confidentiality of clients, as well as to comply with Sec. 7216. The tax opinion letter and valuation study caveats regarding legal privity, spreadsheet and software licenses, e-mail and fax notices, and the planning arrangements described above, should not constitute conditions of confidentiality under the registration rules. The AICPA suggests that the requirement in Temp. Regs. Sec. 301.6111-2T(e)(2)(ii)(D) to attach written materials to Form 8264 be dropped. Alternatively, a registrant could be required to forward the additional materials within 15 days of a written request from the Service. The AICPA recommends that an "ordinary course of business" exception similar to that contained in Temp. Regs. Sec. 1.6011-4T(b)(3)(ii)(A) be added to the Sec. 6111 regulations, to remove from the registration requirement transactions that are clearly business-motivated. The following specific language is recommended:
Temp. Regs. Sec. 301.6112-1T Temp. Regs. Sec. 301.6112-1T, Q&As-1 and -17, require organizers and promoters to maintain lists of investors and copies of all offering materials and to make this information available for IRS inspection on request. These requirements apply to transactions structured for a significant purpose of tax avoidance or evasion, regardless of whether they are offered under conditions of confidentiality or the promoter fees exceed $100,000. Among other things, each list must include, under Temp. Regs. Sec. 301.6112-1T, Q&A-17, a detailed description of the potentially abusive tax shelter, the amount invested by each person, a summary of the schedule of tax benefits each such person is expected to derive and copies of written materials (including tax analyses and opinions on the transaction that have been given to any potential participant or participant representative). AICPA comments: The AICPA has serious concerns about the broad scope of the list requirement. In essence, these regulations can be interpreted to require every tax adviser to list each communication with a client (be it by telephone, letter, face-to-face conversation or even electronic database) in which a tax planning idea is discussed, if there is at least one authority with which the IRS can challenge that idea. These regulations go beyond the scope of Congress's intent for Secs. 6111 and 6112, as well as the stated goals of various Treasury officials for these regulations. Further, a number of items need clarification. The Temp. Regs. Sec. 301.6112-1T, Q&A-5, definition of "organizer" should be modified; a paid professional should be able to provide normal and customary professional services to taxpayers without being deemed an "organizer" under the regulations. In addition, there should be three objective, de minimis exceptions to the list requirement, based on thresholds for fees, tax benefits and hours of professional services the organizer provided in the transaction. Similar to the recommendations for the Sec. 6011 disclosure requirement, the AICPA recommends a $1 million fee threshold for the Sec. 6112 list requirement, to except from that requirement the large number of small transactions that should not be subjected to these rules. Likewise, a substantial dollar threshold, based on tax benefit, should be established for the list requirement; the use of thresholds similar to the dollar thresholds (i.e., the projected tax effect test) in Temp. Regs. Sec. 1.6011-4T(b)(4) would be both reasonable and administrable. Finally, there should be a threshold exception to the list requirement based on the number of hours of professional services the organizer provided in the transaction. An "organizer" should not be required to list any advice provided to a client if he spends less than a de minimis number of professional hours consulting with the client on a transaction. Recently, Treasury and IRS officials stated that, if a tax shelter is offered to a corporate participant, any subsequent individual participant must also be listed. The AICPA shares the government's concern about offerings of objectionable transactions, regardless of the type of taxpayer receiving the offer. The Conference Agreement on Sec. 6111(d) directs Treasury, in consultation with the Justice Department, to issue a report to the tax-writing committees on several tax shelter issues, including an "evaluation of whether confidential tax shelter registration should be extended to transactions where the investor (or potential investor) is not a corporation."20 Based on that request, it appears it was not Congress's intent to extend the corporate tax shelter regime to individual investors without further research and deliberation. Further, because the AICPA has serious concerns about the administrability of the list requirement (even for corporate taxpayers), Treasury should evaluate the administrability and effectiveness of these regulations as they apply to corporations before extending their applicability to individual investors.
Temp. Regs. Sec. 1.6011-4T Finally, Temp. Regs. Sec. 1.6011-4T requires corporate taxpayers to disclose their participation in "reportable transactions" by attaching a statement to their returns. According to Temp. Regs. Sec. 1.6011-4T(b)(4)(i), disclosure is required for "listed transactions" (such as those described in Notice 2000-1521) expected to reduce the taxpayer's Federal income tax liability by more than $1 million in any single year or by a total of $2 million for any combination of tax years. Disclosure is also required by Temp. Regs. Sec. 1.6011-4T(b)(3)(i) for transactions expected to reduce a taxpayer's income tax liability by more than $5 million in a single tax year or more than $10 million in multiple years, if they have at least two of the following characteristics:
However, for purposes of the above test, Temp. Regs. Sec. 1.6011-4T(b)(3)(ii) provides that reporting is not required for transactions undertaken in the ordinary course of business in a form consistent with customary commercial practice, when the taxpayer reasonably determines that (1) it would have participated in the same transaction on substantially the same terms irrespective of the expected Federal income tax benefits or (2) there is a long-standing and generally accepted understanding that the expected Federal income tax benefits from the transaction are allowable under the Code. Reporting is also not required for transactions (1) the taxpayer reasonably determines that there is no reasonable basis under Federal tax law for denial of any significant portion of the expected income tax benefits or (2) identified in public guidance as being excepted from disclosure. AICPA comments: The AICPA strongly supports an effective disclosure mechanism to advise the government of corporate transactions that warrant review and commends the Treasury for its efforts in preparing comprehensive regulations to create such a disclosure system. The AICPA also commends Treasury for addressing the required disclosures under a "reportable transactions" regime; such objective language is more likely to encourage disclosure than a "tax shelter" reporting regime. In general, the AICPA is encouraged by the attempts to make the disclosure requirements in the regulations objective, particularly through the use of published guidance indicating "listed transactions," and through the designation of specific indicators for use in determining if a transaction should be classified as a reportable transaction. The AICPA also appreciates Treasury's attempt to avoid having the disclosure requirements apply to transactions in the ordinary course of a taxpayer's business, through the use of "exceptions." The AICPA reads the regulations as excluding S corporations and other entities (such as regulated investment companies and real estate investment trusts) from the disclosure requirements. However, from the standpoint of consistent and fair tax policy, perhaps these rules should apply to any entity-level tax. In any case, the applicability or inapplicability of the disclosure requirements to all entity-level taxes should be made explicit in the Sec. 6011 regulations. Temp. Regs. Sec. 1.6011-4T(b)(3)(i)(C) sets forth one of the six factors taken into account in determining whether a transaction is an "other reportable transaction" under the disclosure regulations. This factor addresses fees or other consideration received by one or more persons who promoted, solicited or recommended participation in the transaction. One element of the fee factor is the receipt of fees or other consideration with an aggregate value in excess of $100,000. The AICPA believes that this fee threshold should be raised to $1 million to except from the disclosure rules the large number of smaller transactions that should not be subjected to the disclosure requirements. Although the fee threshold for registration is statutorily set at $100,000, because registration applies to a more problematic type of transaction, a lower threshold is appropriate in that context.
Overall Comments The AICPA notes that the value of the guidance in the regulations largely depends on the IRS and Treasury regularly updating the list of "tax avoidance transactions." As such transactions are identified, Notice 2000-15 and its successors must be updated as quickly as possible. Failure to keep these lists current will jeopardize the regulations' viability and objectivity. Clarifying definitions and examples are needed throughout the regulations. Specific recommendations include defining "ordinary course" and "customary commercial practice" as used in Temp. Regs. Secs. 301.6111-2T(b)(4)(i) and 1.6011-4T(b)(3)(ii)(A). Temp. Regs. Sec. 1.6011-4T(b)(3)(i)(E) includes the language "involves the participation of a person that the taxpayer knows or has reason to know is in a Federal income tax position that differs from that of the taxpayer (such as a tax exempt entity or a foreign person)...." Further explanation, including examples, is needed to clarify the meaning of this phrase. Both Temp. Regs. Secs. 301.6111-2T(b)(4)(ii) and 1.6011-4T(b)(3)(ii)(B) use language requiring "...a long-standing and generally accepted understanding that the expected Federal income tax benefits from the transaction...are allowable...for substantially similar transactions." The length of time that tax benefits are understood to be allowable has no bearing on their legitimacy. The substance of the rule would be preserved by eliminating the "long-standing" characteristic and simply requiring the "generally accepted understanding that the expected Federal income tax benefits...are allowable." Likewise, Temp. Regs. Secs. 301.6111-2T(b)(5)(i) and 1.6011-4T(b)(3)(ii)(C) provide exceptions from registration and disclosure requirements if the promoter (-2T(b)(5)(i)) or taxpayer (-4T(b)(3)(ii)(C)) reasonably determines that there is "no reasonable basis under Federal tax law for denial of any significant portion of the expected Federal income tax benefits from the transaction." In both cases, the exception creates a new and unreasonably high standard. For a taxpayer and its adviser to "reasonably determine" that there is no reasonable basis for denial of the tax benefits, there must be a strong "should" or "will" opinion that the taxpayer's treatment of an item or transaction will prevail. This language requires virtual certainty, brings most tax planning into the realm of "corporate tax shelters" and nullifies the exception for all practical purposes. Instead, the AICPA suggests the use of a "realistic possibility of success" (RPOS) standard. In this context (in combination with "reasonably determine"), an elevated standard would exist, thus preserving some viability for the use of the exception. For example, a preparer may generally recommend a position (without disclosure) that meets the RPOS standard, even if a contrary position also meets the RPOS standard. If that situation exists (two RPOS positions) under the AICPA's proposed standard, the exceptions would not be available. Conclusion Corporate tax shelters have been the subject of highly publicized, intense and emotional debate over the last few years; such debate is likely to continue and may intensify and expand over the coming year. The release of the regulations is a critical step in the debate. While Treasury should be commended for its effort, the AICPA points out that "the broadly construed definitions and requirements in the regulations place tremendous burdens on small practitioners as they provide every day tax planning advice to their small business clients." As the debate continues, Congress's, Treasury's and the accounting and legal professions' goal should be to craft solutions that balance tax practitioners' legitimate right to provide tax planning advice to their clients while shutting down clearly abusive transactions. |
