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TEC Inititiatives
Editor:
Editors note: Dr. Purcell is a member of the Tax Executive Committee. DC Currents heightens awareness of the AICPA Tax Divisions work and keeps readers apprised of Division activities involving tax policy, technical issues and other practice support matters. As a senior technical committee of the AICPA, the Tax Executive Committee (TEC) has the authority to speak for the AICPA on tax matters and to act as a standard-setting body, as designated by the governing Council. However, many other committees, technical resource panels (TRPs) and task forces initiate and develop proposed solutions to policy issues and technical and tax administration problems for the TECs consideration and approval. They also initiate proposals for products and services valuable to members in tax practice. Since the last cut-off date for this column (Dec. 15, 2002; see Purcell, TEC Initiatives, TTA, February 2003), the TEC met once (Jan. 2223, 2003) in San Antonio, and exercised its review function on several projects. As is the TECs custom, local state society members (Texas) were invited to participate. TEC actions taken after March 1, 2003 will be reported in a future column.
Administrative Issues Sarbanes-Oxley. At its October 2002 meeting, the TEC established the Sarbanes-Oxley Task Force (chaired by Bob Peterson) to review and provide responses to the December 2002 proposed SEC rules implementing the Sarbanes-Oxley Act of 2002. The task force met several times and submitted its comments to the AICPA leadership in January 2003. Those comments, which focused on audit firms ability to provide tax services to audit clients, became part of the official AICPA response. The final rules, issued on Jan. 23, 2003, reflected some of the Task Forces suggestions. In particular, the document acknowledges the difference between legitimate and abusive tax planning and includes the definition proposed by the TEC to characterize tax shelter transactions. The TEC continues to discuss the appropriate role of the SEC in regulating tax shelter transactions involving audit firms and their clients. Strategic planning. At the same meeting, the TEC approved a strategic planning process for the Tax Section, known as the Strategic Planning Task Force Phase I (chaired by Steve Corrick). When the TEC met in January 2003, it considered and approved the task forces proposals. Phase II of the planning process (chaired by Tom Purcell), will develop strategies and tactics to meet and implement the goals once they are approved by the TEC. During the spring 2003 meeting, the TEC will solicit comments from the membership about the mission, goals, strategies and tactics, and will consider them before approving the final plan (anticipated at the June 2003 meeting).
Self-Governance Activities SSTSs. On Nov. 11, 2002, the AICPA exposed the draft on the Statements on Standards for Tax Services (SSTSs), Interpretation 1-2, Tax Planning. Several comments have already been submitted and catalogued. The public comment and exposure period ended on April 30, 2003. The TEC will assess the comments at its June 2003 meeting. The draft can be found at www.aicpa.org/members/div/tax/sstsint.asp. SSVS. The TEC Business Valuation Working Group provided comments to the Business Valuation Task Force on the draft of Statements on Standards for Valuation Services (SSVS), No. 1. The TEC discussed the issue at its January 2003 meeting and held a conference call with task force members. Those comments and others from the public comment period are being considered for inclusion in the next draft.
Technical Activities Tax shelters. The TEC continues to take an active role in the debate over appropriate oversight of tax shelters. Over the past three years, the IRS has dealt with the tax shelter issue through a series of proposed regulatory amendments, and the TEC has commented on each separate proposal (see Purcell, TEC Initiatives, TTA, February 2003; November 2002; August 2002; May 2002; February 2002; and November 2001). On Dec. 26, 2002, TEC Chair Bob Zarzar submitted a letter to the IRS commenting on the latest revision of the temporary and proposed regulations on tax shelter disclosure statements and registration requirements. The comments, prepared by the Tax Shelter Task Force (chaired by Debbie Pflieger), addressed several concerns as to proposed revisions to the regulations. A major focus of the revisions was to unify the definition of reportable transactions that would require disclosure and tax-shelter-promoter list maintenance. A letter to AICPA members on this issue can be downloaded from www.aicpa.org/members/div/tax/shelters.asp. One provision of the proposed definition would have required any entity with gross assets of at least $100 million to treat any book-tax difference of at least $10 million as a reportable transaction. The comments suggested that many routine transactions might meet this numeric test, while not being tax-shelter motivated. The comments provided a list of suggested exceptions to the disclosure requirement. Although the list was not included in the final regulations, the IRS recently issued Rev. Proc. 2003-25, which provides a similar list of book-tax differences excluded from the disclosure requirements. On Jan. 30, 2003, members of the Tax Shelter Task Force met with House Ways and Means Committee representatives to discuss concerns with pending tax shelter legislation. Principal issues discussed at that meeting were the proposed scope of the more likely than not standard, codification of the economic substance doctrine and the disclosure regimen. The TEC discussed the issues presented by the Senate Finance Committee Report on Enron and the still-pending SEC approach to the effect of tax shelter activities on the relationship between an audit firm and audited companies. This difficult area continues to be one of significant controversy that will be addressed by the TEC in coming months, as appropriate. International tax. On Jan. 9, 2003, the TEC responded to the request of Senator Max Baucus (D-MT) on Nov. 14, 2002, for proposals aimed at addressing competitiveness and simplification in the international tax arena. The TEC comments, prepared by the International Tax TRP (chaired by Andy Mattson), were submitted to the Senate Finance Committees International Tax Working Group. The comments summarize a variety of current international tax rules that effect competitiveness. They can be viewed at www.cpa2biz.com/ResourceCenters/Tax/International. In a letter to the IRS dated Feb. 26, 2003, the TEC suggested that the Service amend the Sec. 853 regulations to simplify reporting requirements for shareholders of mutual funds with investments in foreign countries. The letter, prepared by the International Tax TRP, can be viewed at www.cpa2biz.com/ResourceCenters/Tax/International. Changes in tax years. The TEC submitted a request that the IRS modify the provisions of Rev. Procs. 2002-37, 2002-38 and 2002-39 to allow partners and S corporation shareholders to spread the partnerships or S corporations income in excess of expenses, for the short tax year resulting from a required change of tax year ratably over a four-tax-year period, beginning with the change year. The request, prepared by the Tax Accounting TRP (chaired by Bob Kilinskis), noted that those revenue procedures require partners and S shareholders of entities with fiscal years ending on or after May 10, 2002, that no longer meet the 25% gross receipts test for a natural business year, to include more than 12 months of partnership or S income in their 2002 or 2003 individual returns. At this writing, the IRS had yet to respond.
Miscellaneous Topics On Jan. 27, 2003, Bob Zarzar testified at the IRS Oversight Board hearing on electronic tax administration, enforcement, collection and workforce. Comments for that hearing were prepared by the IRS Practice and Procedures Committee (chaired by Jim Dougherty) and focused on (1) tax shelter initiatives; (2) K-1 matching; (3) the Large and Mid-Size Business Operating Divisions new limited issue focus exam (LIFE) program; and (4) general Examinations issues.
Conclusion Through its various task forces, TRPs and committees, the TEC continues to monitor numerous other projects. The TEC and other Tax Division committees are committed to providing the best service possible to AICPA members. Members who would like to volunteer to assist in Tax Division activities 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. |
