The financial statements for Tax Executives Institute for fiscal year 2010 are reprinted in this issue of The Tax Executive. They represent both a snapshot of the Institute’s financial condition as of June 30 and, more generally, a summary of what the economic recession has wrought in the association community as a whole. For TEI, it was the first time in more than a quarter century that it incurred a loss. This is not a surprise because TEI experienced a decline in all categories of revenue: Fewer tax professionals joined TEI, fewer people attended Institute-level educational programs, and the Institute’s investment, sponsorship, royalty, and advertising income were all lower than they were the previous year.
Henry David Thoreau wrote that “If misery loves company, misery has company enough,” and that has certainly been the case with respect to the current recession. Hardly a single sector of the economy, a single industry or line of business, a single association has been spared the effects of the economic downturn. ASAE — the association of associations (yes, there IS an association for everything) — has confirmed what common sense could tell you:
- Because travel and training budgets have been slashed, attendance at professional meetings and business conventions has fallen dramatically. (The average across the association community has been around 30 percent, and our benchmarking with other tax associations, especially those whose focus is the in-house tax community, confirms the number.)
- Because most nonprofit associations (including TEI) have relatively conservative investment policies (the Institute, for example, invests primarily in government or government-guaranteed securities), their investment yields have declined.
- Because the consulting sector has suffered a business decline, their expenditures for such things as advertising and sponsorships have taken a hit.
That’s what the numbers tell you. And the numbers are sobering. But the numbers don’t tell you the whole story: They don’t tell you that TEI remains a vital, vigorous organization, whose members and volunteers still embrace its mission, and whose leaders and staff remain both dedicated and equipped to advance that mission. And they don’t tell you that, lingering anxiety about the economy notwithstanding, the promised “green shoots” of recovery are present in the tax world and, in particular, in TEI. Indeed, the green shoots are appearing at a reassuring rate.
Before turning away from the June 30 “snapshot,” however, one additional number from the financial statements merits attention: $8,103,836. That’s the total of TEI’s unrestricted net assets at the end of the year (including about $125,000 in the Institute’s section 501(c)(3) affiliate, TEI Education Fund). The prudent build-up of reserves over the years (in the year of the Institute’s last deficit — 1983 — the number was less than 1/20th that amount) positioned the Institute, in the words of last year’s president Neil Traubenberg, “not to flinch or withdraw, but to embrace the challenges head-on.” Thus, TEI was able to offer its members a full complement of educational programs, to continue its advocacy program, and to proceed with major initiatives relating to its membership database and website.
What don’t the numbers tell us about TEI today? They don’t tell us that, while a sense of nervousness about the economy prevails across the globe, the volume of membership applications has grown and attendance at Institute programs has increased. For example, our September 2010 Financial Reporting Seminar drew more people than the similar program did in 2009. The same was the case for our International Tax Course, at which we had to turn away registrants because of space limitations. And, finally, attendance at this year’s Annual Conference in Chicago was nearly 20 percent greater than at the 2009 conference in San Antonio.
The numbers also don’t tell us that TEI’s influence in the advocacy world — measured, for example, by our effectiveness in respect of Schedule UTP (see Paul O’Connor’s column for more on this topic), the OECD’s transfer pricing initiatives, and business 1099 reporting — is stronger than ever. And they don’t tell us that member satisfaction with TEI at all levels remains high.
And perhaps most dramatically, the numbers on the financial statements do not tell us about the energy, the effectiveness, and the indispensability of TEI’s network of chapters and regions. Specifically, the figures in the Institute’s audited financial statements do not include information relating to the operations of our 54 chapters and 9 regions. (These operations, however, are reflected on TEI’s Form 990.)
Thus, while TEI members at the height (or depth?) of the recession were not able to catch airplanes or stay at hotels to attend Institute-level programs, they flocked to chapter and regional programs. Attendance at these local meetings exceeded that of prior years and, indeed, our cadre of local leaders responded to the reduction of their members’ travel and training budgets by offering more and better programs.
What’s more, the chapters did not sacrifice their own financial stability to do so. In the aggregate, the chapters ended the year with nearly $1.5 million in cash reserves. And this was after making more than $150,000 in scholarship grants, proving that it is possible to do well by doing good. On behalf of the entire membership, I thank our chapter leaders for their generosity and their stewardship of the Institute.
It’s been an article of faith for many years that the Institute’s best competition comes not from for-profit groups or other associations that often charge more than twice as much as TEI, but from our chapters (and regions). This truism has been demonstrated time and time again during the recession.
Four local meetings that I attended merit attention. In June, I had the opportunity to attend Region II’s two-day Tax Forum in Atlantic City. Organized by Ray Gwydir of the New York Chapter and Tony Bernice of the New Jersey Chapter, and presided over by Regional Vice President Paul Heller, the conference focused on tax issues that are affecting all industries and every corporate tax department. The planning committee worked with sponsors McCarter & English and Grant Thornton to line up experts and seasoned practitioners from around the country to lead a comprehensive range of discussions on today’s real business issues and the value of tax planning to address these issues in today’s marketplace. The luncheon speakers at the conference were Michael Danilack, LMSB’s new Deputy Commissioner (International), and TEI’s 2009-2010 President Neil Traubenberg. The conference also featured Donna Hansberry, LMSB Industry Director – Global High Wealth, and Joseph Nega, Senior Legislation Counsel, Joint Committee on Taxation.
Next up was a trip to New York City for the New York Chapter’s Annual Meeting of Members. The technical program for this half-day meeting focused on the ethical implications of two pressing issues — the codification of the economic substance doctrine and the IRS’s new Schedule UTP. The technical presentations were top-notch, and special thanks are owed to outgoing president Lori Matulewicz, incoming president Barry Agranoff, Ray Gwydir (again), John Allen, Linda Klang, Steve Rogozinski, Tom Wharton, and Josh Wind. The meeting also gave me the opportunity to present a check to Beatrice Kernan, Executive Director of Project Sunshine, a charity selected to receive a grant as part of TEI’s Social Responsibility Initiative.
New York was also the venue of the 10th Annual LMSB Financial Services Industry Conference. For a decade, TEI has worked with the IRS’s Financial Services Industry to host a program that is second to none in bringing together experts from the IRS, private industry, and law and accounting firms to discuss emerging financial services issues. The speakers at this September’s conference included LMSB Commissioner Heather Maloy, Deputy Commissioner (International) Mike Danilack, and Deputy Commissioner (Operations) Paul DeNard, as well as IRS Chief Counsel Bill Wilkins.
Since its inception, the Financial Services Conference has been more than an outstanding educational meeting. It has been more than an invaluable networking forum. It has been and stands as an unassailable testament to the strong partnership and collaborative relationship between TEI’s New York Chapter and the IRS’s Financial Services Industry. Since 2001, I have had the pleasure to participate in most of the conferences, and each of them left me in awe of the hard work and dedication of everyone involved.
This year’s conference — which drew more than 200 participants
— was no different, and special mention should be made of Walter Harris, Financial Services Industry Director, as well as IRS employees Louise Kaminskyj and Maggie Maza, who were honored with Outstanding Taxpayer Service Awards in recognition of their support of the conference since its inception. The following chapter leaders also contributed significantly: Paul Heller (conference chair), Barry Agranoff, Lisa Cappell, Louis Celano, Ray Gwydir, Lori Matulewicz, Steve Rogozinski, Linda Klang, Tom Wharton, and Josh Wind. (Many of these names are the same as those previously listed in respect of the Region II Tax Forum and the New York Chapter’s Annual Meeting. That’s no typographical error. These members have long been mainstays of the New York Chapter, and its members are properly in their debt.)
The final meeting I want to mention is the EMEA Chapter’s early fall meeting in London. This two-day meeting was remarkable. The technical topics included transfer pricing, permanent establishment, U.S. tax developments, customs, VAT, and risk management. Thanks are owed to NERA Economic Consulting, Transfer Pricing Associates, and Baker & McKenzie for serving as sponsors of the program, as well as to TEI member David Murphy whose employer (Bechtel) hosted the meeting. Finally, chapter president Clive Baxter did a fine job of coordinating the meeting. I thank him and the other leaders of the chapter for the courtesies they extended me on my trip to the United Kingdom.
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For the past several years, TEI has held a financial reporting seminar, which as previously noted attracted a good audience this year. One feature of the program is a vendor show at which registrants can visit with representatives of software and other firms whose products and services can assist corporate tax departments in grappling with the changes associated with financial reporting rules (such as FIN 48) and the attendant tax rules (such as Schedule UTP). The firms participating in this year’s vendor show were: BDO USA, CORPTAX, Grant Thornton, Longview Solutions, McGladrey, Thomson Reuters (ONESOURCE), and Vertex. On behalf of the Institute, I thank these firms whose financial support makes it possible to minimize fee increases.