TEC Initiatives

Editor:
Thomas J. Purcell III, J.D., Ph.D., CPA
Associate Professor of Accounting and Professor of Law
Creighton University
Omaha, NE

Editor’s note: Professor Purcell is Vice Chair of the AICPA Tax Division’s Tax Executive Committee. DC Currents heightens awareness of the Tax Division’s activities and apprises readers of tax policy, technical issues and other practice support matters.

 

As a senior technical committee of the AICPA, the Tax Executive Committee (TEC) is authorized to speak for the Institute on tax matters, and is also designated by governing Council as a standard-setting body. However, numerous other committees, technical resource panels (TRPs) and task forces initiate and propose solutions to policy, technical and tax administration problems, for consideration and approval by the TEC. They also initiate proposals for valuable products and services for members in tax practice.

Since the last cut-off date for this column (March 1, 2004; see TTA, May 2004), the TEC met once at the Spring 2004 Tax Division Meeting (June 10–11, 2004) and exercised its review function on several projects. TEC actions taken after June 15, 2004, will be reported in a future column.

Tax Division Administrative Issues

The TEC continues to monitor implementation of the Tax Section’s strategic plan; for the original plan, see www.aicpa.org/download/tax/tax_section_strat.pdf. The Tax Section Strategic Plan Implementation Task Force met in May 2004, and discussed performance metrics, timelines and delegation of the responsibility for completing action plans. It also scanned the environment to determine whether to modify the plan to reflect emerging external trends. At the June 2004 meeting, the task force discussed the plan’s key action steps at length, in both plenary sessions and in small groups. The TEC will consider the task force’s recommendations at its August 2004 meeting.

Self-Governance Activities

At the June 2004 meeting, the TEC received a preliminary report on Proposed Interpretation No. 3-1, “Tax Practice Quality Control,” of Statement on Standards for Tax Services (SSTS) No. 1. The proposed interpretation provides guidance on SSTS No. 3, Certain Procedural Aspects of Preparing Returns. The report was prepared by the SSTS Quality Control Task Force (chaired by Joe Scutellaro). The TEC gave its comments on the draft interpretation to the task force, and passed on several issues of concern to the task force. It will consider approving exposure of the document at a future meeting.

Technical Activities

General: On March 30, 2004, Bob Zarzar, TEC Chair, testified before the Subcommittee on Oversight of the House Ways and Means Committee on the 2004 filing season and the Service’s FY 2005 budget. His testimony (1) reiterated the AICPA’s support of the IRS’s electronic filing and tax administration programs; (2) recommended approving the IRS’s FY 2005 budget requests; (3) identified problems with information returns caused by the reduction in the tax rate on dividends under the Jobs and Growth Tax Relief Reconciliation Act of 2003 (JGTRRA); and (4) described the AICPA’s position on return preparation outsourcing. Mr. Zarzar’s testimony is available at http://waysandmeans. house.gov/hearings.asp?formmode=view&id=1316.

On May 25, 2004, the TEC gave Treasury and the IRS some suggestions on its 2004–2005 Priority Guidance Plan, which is the operating plan for identifying areas that will merit regulatory and interpretive action during the next “guidance” year, beginning July 1. Each Tax Division committee and TRP reviewed the plan and compared the proposed projects with its own experience and expectations of administrative guidance.

On June 11, 2004, the TEC received a report on the Congressional proposal for tax preparer registration, found in Section 141 of S 882, the Tax Administration and Good Government Act. The TEC will continue to monitor this issue as Congress considers S 882 and will refine a formal position on the proposal that it will communicate shortly.

Tax accounting: On April 30, 2004, the TEC submitted comments to the IRS on proposed regulations for separate guidance for accounting-method changes made under Sec. 381. The Tax Accounting TRP (chaired by Barry Tovig), recommended treating accounting-method changes under Sec. 381(c)(4) or (5) in the same manner as requests for a method change under Sec. 446(e), including provisions for an appropriate spread period for adjustments. The comment letter is available at www.cpa2biz.com/ResourceCenters/Tax/Tax+Accounting/MethodChange Regs.htm.

Also on April 30, the TEC gave the IRS comments on IR 2004-14, Proposed Schedule M-3. The Proposed Schedule M-3 Task Force (chaired by Bob Kilinskis) analyzed the proposed form and related procedures, and recommended (1) deferring the effective date for using the new form until tax years beginning after 2006; (2) limiting the initial application to corporations with assets of $250 million or more; and (3) deferring implementation of certain reporting requirements for two tax years, which would give taxpayers sufficient time to develop the information system needed for compliance. The task force’s comments are available at www.cpa2biz.com/ResourceCenters/Tax/Corporate/FormM3.htm.

Partnerships: On April 26, 2004, the AICPA provided the IRS with comments on the proposed regulations covering assumption of partner liabilities under Sec. 752. The Section 1.752-7 Task Force (chaired by Hughlene Burton) prepared the comments. The AICPA requested additional guidance on assumptions of liabilities when a built-in loss and a liability reduction are not the same amount. It also asked for clarification in applying Sec. 704(c) principles to a contributing partner’s built-in loss, and requested extending the deadline for making the proposed election for liabilities contributed between Oct. 18, 1999 and June 24, 2003. The comments are available at www.cpa2biz.com/ResourceCenters/Tax/Partnership/PartnershipLiabilities.htm.

Transfer tax reform: At the June 2004 meeting, the TEC approved the report of the Task Force on Federal Transfer Taxes, a joint effort of the AICPA, the American Bar Association, the American College of Tax Counsel, the American College of Trust and Estate Counsel and the American Banker’s Association. The report analyzed technical and transitional consequences of the JGTRRA’s changes to the transfer tax system. It did not specifically recommend regulatory or legislative action, but assessed the effect of the changes on simplicity, compliance and consistency. Once approved by all participating task force members, the report will be shared with Congress and Treasury, and made public.

Conclusion

Through its various task forces, TRPs and committees, the TEC continues to monitor numerous other projects. The Tax Division is committed to providing the best service possible to AICPA members. Leadership and membership appointments for committees and TRPs for the upcoming committee year (starting Oct. 19, 2004) are complete. However, AICPA members who would like to volunteer for Tax Division activities (e.g., on task forces or for future appointed service) can contact Ed Karl at (202) 434-9228 or ekarl@aicpa.org. Members having suggestions for new services or products can contact Bill Stromsem at (202) 434-9227 or wstromsem@aicpa.org.