Spring 2010
What an eventful spring it has been for TEI. The Table of Contents of this issue reflects the breadth of the Institute’s technical activities. From congressional testimony on state tax apportionment issues to an amicus brief in a case involving the States’ ability to retroactively change the rules governing refund suits, TEI manifested its enhanced role in shaping state tax policy. Similarly, the Institute’s continuing work on the harmonization of provincial sales taxes with Canada’s federal Goods and Services Tax demonstrated the benefits of persistence: TEI first testified before the Canadian Parliament in favor of harmonization in 1989, and more than two decades later it saw two more provinces – British Columbia and Ontario – take tangible steps in the right direction.
Liaison Meetings
The Institute’s three Washington liaison meetings – with Assistant Treasury Secretary Michael Mundaca and his colleagues in the Treasury’s Office of Tax Policy, IRS Commissioner Douglas Shulman and other senior officials of the Internal Revenue Service (including Chief Counsel William Wilkins), and LMSB Commissioner Heather Maloy and her colleagues – provided the Institute with forums in which to discuss its concerns on a broad array of issues. Among other things, the Institute’s Executive Committee and committee chairs discussed prospects for making the Compliance Assurance Process program permanent, the effect of the tiered issue process on Appeals, the efficacy of a U.S.-Singapore Tax Treaty, open questions about section 457A (relating to nonqualified deferred compensation plans of foreign employers), and audits of employer-provided cell phones. The minutes of these meetings will appear in the next issue.
What loomed over the liaison meetings, however – and, indeed,over the entire year – was another topic: IRS Announcement 2010-9. In early March when the liaison meetings were held, draft Schedule UTP had not yet been released, so our discussion was not as focused as it became later in the spring, but it was still animated and, from TEI’s perspective, helpful in allowing us both to better understand the IRS’s motivations in issuing Announcement 2010-9 and to convey the concerns of tax executives about the initiative.
Midyear Conference
Transparency also dominated this year’s Midyear Conference, with multiple sessions touching on the fallout from Announcement 2010-9 and the IRS Commissioner’s related “conversation with theboard room.” The Institute is very grateful that Commissioner Shulman and LMSB Commissioner Heather Maloy addressed the conference, as did Deputy Assistant Treasury Secretary Emily Mc-Mahon, who discussed the Treasury’s guidance priorities in the aftermath of Health Care Reform and the HIRE Act. LMSB Deputy Commissioner Michael Danilack and IRS Associate Chief Counsel (Corporate) William Alexander also participated in the conference. Mr. Danilack noted that transfer pricing, withholding on nonresidents, and offshore compliance will be a major area of emphasis this year, and Mr. Alexander fielded many questions about the codification of the economic substance doctrine. The conference also heard from Congressman Richard Neal of Massachusetts, a senior member of the House Ways and Means Committee, who discussed topics as varied as the effect of the budget deficit on tax reform, transfer pricing abuses, and estate tax reform.
We appreciated these officials’ willingness not only to share their perspectives but to respond to our questions and concerns. The demands on their time are momentous, and their level of engagement – their outreach to the tax community – is commendable.
While federal tax topics typically dominate the Institute’s spring conference in Washington, state and local, Canadian, and management topics were not given short shrift. A complete summary of the conference may be found in this issue, but I would be remiss if I did not thank the Institute’s committee chairs as well as the moderators and speakers for helping make this year’s Midyear a success.
New Website Launched
One other development this spring deserves special mention: the launch of TEI’s new website in March marked not so much the end of a process, but at best its midpoint. The new site stands as a marked improvement over its predecessor, and we are gratified by both the increased traffic we have experienced and the favorable comments we’ve received. We also appreciate the not-so-favorable comments, which have helped us focus our debugging efforts as well as our commitment to suffusing the site with more timely and useful information. My thanks to everyone in the membership and the staff who have contributed to the website’s development and whose continued engagement will help us make it better.
Yes, We Can . . . and Did
When I became TEI’s International President last August, there was no doubt in my mind that this would be an extremely busy and an extremely challenging year. With the financial issues facing our companies and the world in general, I recognized that budgets were going to be reduced, the importance of training lowered in priority, and travel dollars at a premium. At the same time, the demands on TEI’s members – in terms of coping with ever-changing tax laws and increasingly aggressive tax authorities – and the role of the Institute
in helping them respond to those demands required us not to flinch or withdraw, but to embrace the challenges head-on.
Hence, the goals TEI’s Board of Directors established for the year focused on maintaining the level of excellence that we have come to expect from TEI: Remaining the preeminent organization for business tax professionals. Maintaining our tradition of providing comprehensive, cost-effective education. Effectively advocating the membership’s views at all levels of government.
Among the strengths – and challenges – facing TEI is the breadth of our membership, in terms of our members’ varying experience levels, the sizes of their companies, and their industries’ often divergent interests. Recognizing the challenge, we are looking at how to create enhanced networking opportunities for members during their first five years of membership – their formative years. On the other end of the scale, we are also looking at how best to bring relevant information and value to chief tax officers of companies of all sizes. Having a membership in excess of 7,000 is wonderful, but it does bring its own issues. I am a believer that every challenge provides an opportunity, and we have tried our best to make the most of these opportunities.
For example, restrictions on travel and training budgets contributed to a decline in attendance at Institute-level programs. How did the Institute respond to this challenge? Not by sulking, but by stepping up the already high quality of its chapter and regional programs, which have long been the Institute’s most effective – and welcome – competition. We also broadened the scope of TEI’s webinars and other distance learning programs.
As I assumed office last summer, my expectation was that the majority of the Institute’s time this year would be dedicated to Tax Reform. I had visions of being on C-SPAN testifying on the myriad issues that would be arising under various tax reform proposals. As part of its preparatory work for what we thought would come, TEI in October filed its Guideposts to Tax Reform with the Tax Reform Commission chaired by Paul Volcker. The document, which can be found on our website, was a top-notch piece of work, especially
given our diversity and our consensus model of decision-making. But, given the lagging economy and other events, the Volcker Commission faded from the headlines into the shadows.
Of Transparency and Uncertain Tax Positions
One of the “other events” referred to in the preceding paragraph – at least in terms of TEI’s emphasis – was Commissioner Shulman’s November 2009 remarks to the National Association of Corporate Directors. The basic thrust of the talk was to open a dialogue within and among corporate boards of directors on what role the board plays in setting and overseeing the company’s tax risk management policy.
The Commissioner’s basic premise – that the Board should play a role – is one I agree with: With tax generally controlling 40 percent of a corporation’s bottom line, the board should have an awareness of the company’s philosophy and its appetite for tax risk. I don’tthink many TEI members disagree. That said, there was sharp disagreement with certain aspects of the Commissioner’s remarks, in particular, the suggestion that the board consider bringing in an independent third-party adviser to review the company’s positions and to provide advice to the board. Indeed, the reaction from members was so swift and pronounced that we sat down with the Commissioner and some of his staff. (I discussed this meeting in a prior column.) We had a further opportunity to discuss this with the commissioner during our annual liaison meetings (as noted above) as well as in testimony before the IRS Oversight Board.
As important as the Commissioner’s November “conversation” was (and remains), its relative significance was diminished by his January remarks to the New York State Bar Association, during which he unveiled the intention to release Schedule UTP. There is scarcely a tax professional working today who is not well familiar with the draft schedule or Announcement 2010-9, and as already discussed, the disclosure of uncertain tax positions played a very important part in our liaison meetings and the Midyear Conference.
To a large degree, however, those events were mere prologue to the Institute’s efforts to prepare comments on new Schedule UTP, a process that culminated on May 28 when the Institute submitted a 44-page position paper to the IRS. I commend the Institute’s comments (which are available on TEI’s website and will be reprinted in the next issue of the magazine) to all members, and not because my name is on it. The submission represents TEI at its best: collaborative, thoughtful, and persuasive.
The Institute received more than 200 comments from members on this matter. To be sure, some were short and perhaps not so sweet. But most were analytical and constructive. Culling through the comments was a major undertaking. Among the Institute committees involved in drafting and reviewing the comments were the Federal, International, IRS Administrative Affairs, and Financial Reporting Committees. I have long said that TEI’s staff is second to none, and with this effort, that is undeniably true: Working with the four committees, they did an amazing job of distilling the comments down into a meaningful, well-reasoned document. Special thanks go to Jeff Rasmussen and Eli Dicker for leading up the effort from the staff.
My pride about our submission notwithstanding, my point in describing our response to Announcement 2010-9 is not just aboutthe importance of Schedule UTP to TEI members and their companies. It’s about TEI’s nimbleness, its professionalism, and its ability to respond to whatever the economy, the tax authorities, or outside events throw at it.
Other Developments
With Announcement 2010-9 playing such an important role in TEI’s advocacy work this part year, it would be easy to overlook all the other fine work of the Institute’s committees. It would be easy, but wrong. Among the topics demanding – and receiving – attention were the following:
• The applicability of the work-product privilege to tax accrual workpapers (Textron)
• The tax compliance provisions of the Health Care Reform Act
• Proposed OECD Guidance on Arm’s-Length Pricing
• Article 7 (Business Profits) of the OECD Model Tax Treaty
• IAS 12
• Proposed Combined Reporting Regulations in Wisconsin and Nexus Regulations in Colorado
In addition to our advocacy work, TEI continued its tradition of strong educational programs at the chapter and Institute level, and it worked to expand its network of tax executives by expandingfrom Europe and Asia into the Middle East and Africa. While this expansion was slowed by the global recession, we remain well positioned for growth. We also continued our Social Responsibility Initiative, making five grants to worthy organizations. I would be remiss if I did not recognize the first recipient of the Institute’s Pro Bono Award, Alan Sankin of the Santa Clara Valley Chapter. His good efforts (described elsewhere in this issue) should inspire us all to volunteer not only our money but our time to charitable endeavors.
When I became Institute president, I told the Board of Directors that I was committed to having TEI remain the preeminent organization for business tax professionals. With the help of countless members – from chapter presidents to committee chairs to board members – and a dedicated staff, we have done more than an admirable job with that. TEI is a volunteer organization and is dependent on each and every member to maintain the vibrancy and significance of the organization. I owe a debt of gratitude to everyone who contributed to making the year a success. It has been an honor for me to serve as TEI President.
Thank you.
