January-February 2009
In my last column, I wrote at length about the liaison meetings that TEI holds each December with the Canadian Department of Finance and the Canada Revenue Agency. As a veteran of more Ottawa meetings than I would like to admit, I waxed enthusiastic about how they advance not only the Institute’s advocacy mission but also our educational and networking objectives. Thus, in putting together the agendas for the annual meetings and then preparing for them, we strengthen the bonds among members on a cross-industry, continental basis, and in conducting the meetings we not only openly share information about how the tax rules work (the essence of education), but also educate ourselves and our government counterparts about the other’s perspectives.
My experience with TEI’s Washington liaison meetings is not as long as it is with the Canadian meetings, but my impressions are just as strong and as positive. This year, TEI held two meetings in mid-February — the first with the IRS’s Large and Mid-Size Business Division and the second with IRS Commissioner Shulman and other senior IRS officials. Ordinarily, there would have been a third meeting scheduled at the same time, with officials of the Treasury Department’s Office of Tax Policy, but the change in Administrations prompted us to delay that meeting until a new tax policy team is in place. The agendas for the two meetings are reprinted in this issue.
The LMSB and IRS liaison meetings resemble their Canadian counterparts in several important respects. First, the development of the agendas was a collaborative exercise. Several months in advance of the meetings, the Institute began soliciting ideas from the membership at large, and the items in the agendas came from a cross-section of members. Second, during the meeting, the TEI delegation — composed of our Executive Committee, key committee chairs, and staff — engaged in candid and constructive conversations about the issues with the government participants. To be sure, on some issues we simply agreed to disagree, but there were also some occasions where, upon learning of the challenges that certain rules or procedures posed, the IRS voiced a willingness to look at less burdensome alternatives or to hold follow-up conversations to better understand taxpayer concerns.
I was especially heartened by the discussions at both our liaison meetings of the steps the IRS has taken in response to the economic downturn. For example, the IRS has marshalled significant resources in order to expedite the processing of refunds. Equally important, it has recognized that staffing reductions and other cutbacks in the corporate community may in some cases affect the ability of tax departments to respond to IRS requests and hence necessitate adjustments to the audit plan. Full details of the meetings will be included in the next issue of the magazine.
TEI Weighs in on Economic Stimulus
For the first few months, the economic downturn was like the weather: Everyone was talking about it, but no one seemed to be doing anything about it. Then, shortly before the U.S. election, Congress passed the gargantuan Troubled Asset Relief Program bill in the hope that it would stabilize the credit markets and kick start the economy. While no one knows what would have happened if the Bush Administration and Congress had not intervened last fall, we all know that TARP did not “solve” the problem or obviate further government action. Thus, even before President Obama took office, Congress began crafting an economic stimulus bill that was intended to spur employment and growth.
After reviewing the various proposals that were made, TEI filed comments on the proposed economic stimulus legislation with Congress in early February. Our internal discussions on this topic were focused less on whether to participate in this important legislative matter than on what provisions in the more than three-quar-ters of a trillion dollar bill TEI could build consensus around.
We began our submission by noting that no sector of the economy was untouched by the economic downturn, and said the key in crafting effective stimulus legislation “lies in properly balancing tax and non-tax provisions and, with respect to the tax provisions, the provisions affecting individual and business taxpayers.” We added that, at its core, the stimulus bill should include provisions that “will directly and significantly stimulate business activity and hence have a ‘multiplier effect’ beyond that of narrow tax and spending programs.” To this end, the Institute recommended that Congress:
- Lengthen the carryback period for net operating losses to five years without a reduction in the amount of the losses to be carried back.
- Lengthen the carryback period for general business tax credits to five years and temporarily permit 100 percent of a taxpay-er’s net income tax liability to be offset by the general business credit.
- Extend the provision allowing additional first-year depreciation on qualified investments.
- Extend the period in which taxpayers may claim accumulated alternative minimum tax credits or research tax credits in lieu of the additional depreciation on qualified investments.
- Extend the research tax credit and make it permanent. At a minimum, extend the credit through December 31, 2010.
TEI supported these proposals because they could have been expeditiously implemented with a minimum of administrative burden on taxpayers and the government, and (most significantly) place much needed funds in the hands of distressed businesses at a critical time. TEI’s full submission is reprinted in this issue.
Given the Institute’s tradition of operating by consensus, debates about legislative matters are never easy. The risk of adopting legislative positions that might create “winners” and “losers” among the membership is very real. It is a natural byproduct of being a broad-based organization, and it is a reason why TEI sometimes feels constrained against taking positions on legislative matters. It should not, however, dissuade members from sharing their views or, indeed, from pressing the Institute to stake out positions on the important tax issues of the day. Even if our diversity prevents us from weighing in on some issues, I am confident we will be able to contribute to the debate and, hence, make a difference in the
OECD Activity Continues
I would be remiss if I did not mention the Institute’s comments on a discussion draft of a new Article 7(Business Profits) of the OECD Model Tax Convention. This project is important not only because the Organisation for Economic Co-operation and Development is an extremely influential organization whose
Model Treaty guides tax administration in numerous countries, but because it stands as an example of TEI’s truly global nature.
Responding to the OECD’s invitation, members of the European Direct Tax Committee and the European Chapter’s Permanent Establishment Committee held a series of conference calls during the summer and fall to catalogue a list of taxpayer concerns and comments on the revised Article and treaty commentary. Those efforts culminated in a submission that took into account feedback from members of our Canadian Income Tax and U.S. International Tax Committees and that was filed with the OECD in mid-January. I thank all of those who contributed.