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: Prof. Purcell is Chair of the AICPA Tax Divisions Tax Executive Committee. DC Currents heightens awareness of the Tax Divisions 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 develop proposed solutions to policy issues and 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 (Sept. 1, 2004; see TTA, November 2004), the TEC met once (Nov. 1, 2004) and exercised its review function on several projects. TEC actions taken after Dec. 1, 2004 will be reported in a future column.

Administrative Issues

The TEC continues to implement and monitor progress on the Tax Sections Strategic Plan. The original strategic plan is available at www.aicpa.org/download/tax/tax_section_strat.pdf.

Self-Governance Activities

The TEC continues to promote a better understanding of the Statements on Standards on Tax Services (SSTSs); see www.aicpa.org/download/tax/SSTSfinal.pdf for SSTSs. Six breakout sessions on the SSTSs were conducted by the Tax Division at the 2004 IRS Nationwide Tax Forums (co-sponsored by the AICPA). The TEC continues to reach out to state CPA societies, by holding SSTS sessions at their conferences.

The Tax Practice Quality Control Task Force (chaired by Joe Scutellaro) has proposed an interpretation of SSTS No. 3, Certain Procedural Aspects of Preparing Returns. The interpretation would indicate, in general, that a member should have a quality control system for his or her tax practice. The TEC provided comments to the task force on Nov. 1, 2004; several TEC members are assisting in modifying the current draft.

The TEC has provided extensive comments to the AICPAs Consulting Services Executive Committee on proposed Statement on Standards for Valuation Services No. 1. This Statement would create binding ethical responsibilities for CPAs performing certain valuation engagements. The comments addressed the overlap of valuation engagements with tax engagements. At press time, the statement has not been approved for exposure to AICPA members.

Technical Activities

General: On Nov. 29, 2004, the TEC responded to a request by the IRS Oversight Board to comment on its administrative priorities. The comments, prepared by the IRS Practice and Procedures Committee (chaired by Mark Van Deveer), suggested focusing on the 20052009 Strategic Plan goalsi.e., improving taxpayer service, enhancing enforcement and modernization. The comments are available at www.cpa2biz.com/ResourceCenters/Tax/
Legislative%2c+Administrative%2c+Judicial/2005PriorityItems.htm.

Tax Division members assisted the AICPAs Center for Public Company Audit Firms in providing information to the Public Company Accounting Oversight Board (PCAOB) on possible rules for tax services. Several meetings and conference calls resulted in an informational letter being sent to the PCAOB on Nov. 22, 2004, requesting a list of the tax services that firms provide to small-business-issuer clients.

Tax shelters: As regular readers of this column will recall, over the last several years the Tax Division has been communicating with Congress about various iterations of tax shelter legislation. Interest in such legislation had continued into 2004, most notably in the foreign sales corporation/extraterritorial income legislation, culminating on Oct. 22, 2004, with the enactment of the American Jobs Creation Act of 2004 (AJCA). On June 30, 2004, the AICPA sent letters to the Chairs and ranking minority members of the Senate Finance and House Ways and Means Committees (as well as initiating an AICPA Federal Legislative Action Alert), indicating the Institutes strong support for adopting the House version of the legislation; see www.cpa2biz.com/ResourceCenters/Tax/
Legislative%2c+Administrative%2c+Judicial/TaxShelterBills.htm. It also strongly expressed concern about two provisions that would (1) codify the economic-substance doctrine and (2) raise the tax return standard (for both taxpayers and preparers) to more likely than not for all return positions. In the AICPAs opinion, these provisions would have long-term, negative effects. Fortunately, both were dropped in conference and not included in the AJCA.

Estates and gifts: On Nov. 10, 2004, the TEC provided comments to the IRS on proposed regulations to elect out of generation-skipping transfer (GST) deemed allocations under Sec. 2632(c). The proposed rules provide guidance for making the election, under Sec. 2632(c)(5)(A)(i), not to have the deemed allocation of unused GST exemption, under Sec. 2632(c)(1), apply to certain transfers to a GST trust, as defined in Sec. 2632(c)(3)(B). The comments, prepared by the GST Regs Task Force (chaired by Justin Ransome), suggested wording changes that would eliminate any confusion about the deemed allocation of a GST exemption to direct and indirect skips. The letter is available at www.cpa2biz.com/ResourceCenters/Tax/
Estate%2c+Gift%2c+Trust%2c+Fiduciary/ElectOutGST.htm; see also News Notes, GST: Predeceased Parent Rule and Deemed Allocation Prop. Regs.,  this issue.

Fundamental tax reform: In December 1995, the Tax Division published a study entitled Flat Taxes and Consumption Taxes: A Guide to the Debate. It developed the guide to educate and cast light on how specific fundamental tax reform proposals would operate. Given the current discussions about overall tax reform, the Tax Legislation and Policy Committee (chaired by Don Barnes) is updating that publication. To fundamentally reform the Code to make it simpler, fairer and pro-growth, President Bush intends to create a bipartisan panel to advise the Treasury Secretary on options. In reacting to the Presidents announcement, the AICPA is actively recommending an AICPA representative in the event such a panel is formed.

The President has indicated reforming Social Security, as a major priority of his second term. As a result, the Tax Division formed a task force to update a study it published in 1998, entitled Understanding Social Security: the Issues and Alternatives. Like the flat-tax study referred to above, the principles raised in the original document remain relevant today.

Tax simplification: Simplification of the current income tax system has been one of the Tax Divisions highest priorities for several years. Sometimes, its efforts are successful. For example, its proposal to unify the definition of a child was incorporated into the recently enacted Working Families Tax Relief Act of 2004; for details, see Cook and Oestreich, WFTRAs Individual Income Tax Provisions, this issue. Overall, in commenting on legislation and regulations, the Tax Division will continue to express its conviction that the tax system should be simpler and fairer.

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 current committee year, which started on Oct. 19, 2004, are completed. However, members who would like to volunteer to assist in Tax Division activities (e.g., on task forces or for future appointed service) should contact Ed Karl at (202) 434-9228 or ekarl@aicpa.org. Members having suggestions for new services or products should contact Bill Stromsem at (202) 434-9227 or wstromsem@aicpa.org.