Application of proposed rulemaking moratorium to tax regulations.

On January 18, 1995, Tax Executives Institute filed the following comments with the Senate Committee on Government Affairs and the House Committee on Government Reform and Oversight on whether any moratorium on federal rulemaking should apply to tax rules issued by the Internal Revenue Service and the Department of the Treasury. The comments took the form of a memorandum from TEI President Linda B. Burke to the members of the two committees.

On behalf of Tax Executives Institute, I am writing to oppose the application to the Internal Revenue Service and the Department of the Treasury of any moratorium on the issuance of rules or regulations. For the reasons set forth below, the Institute believes the extension of any rulemaking freeze to tax regulations would be counterproductive.

Background

Tax Executives Institute is a volunteer, professional association of nearly 5,000 accountants, lawyers, and other professionals who are responsible for managing the tax affairs of their companies. TEI members must contend daily with business tax laws, from both tax planning and tax compliance perspectives. TEI represents more than 2,700 companies - a cross-section of the business community. The Institute is firmly committed to maintaining a tax system that works-both for taxpayers and tax administrators. We believe the diversity and training of our members enable us to bring a uniquely balanced and practical perspective to your attention.

Discussion

Congress has under consideration proposed legislation that would impose a moratorium on the issuance of federal regulations, including those promulgated on tax matters by the Department of the Treasury and the Internal Revenue Service. Regardless of the general merits of the proposal, TEI believes the country would be illserved by the application of any such moratorium, or regulatory freeze, to tax regulations. Consequently, the Institute urges Congress to exempt tax rules and regulations from the scope of any legislation on this subject.

Let there be no mistake: TEI and its individual members, frequently take issue with particular IRS rules, or with specific provisions in regulations issued by the Treasury Department. We sometimes conclude that the IRS and Treasury have overstepped their bounds and that they promulgate regulations that unnecessarily increase taxpayer burden. And we sometimes even argue that Congress should intervene to overturn the result in a given set of regulations. TEI sincerely believes, however, that these instances of regulatory overreaching can be most effectively addressed on a case-by-case basis and that the application of a regulatory freeze would do more harm than good.

The tax law of the United States is extraordinarily complicated. The cause of the complexity, however, lies not with the IRS or Treasury but with the Internal Revenue Code itself. The Code is replete with unclear provisions, with ambiguous provisions, with open-ended provisions. Taxpayers (and the government employees who are charged with enforcing the law) are dependent on regulations to fill in the gaps, to explain the ambiguities, to finish the job that Congress often, with good reason, leaves unfinished. For this reason, we also believe the problems with the regulatory freeze cannot be remedied by excepting only regulations that make effective tax relief' from any rulemaking moratorium. This is because one person's relief may well be another person's adverse consequence.

Stated simply, taxpayers-and taxpayer groups such as TEI-continually press the IRS and Treasury for more, not less, guidance. The IRS's report of pending regulation projects as of October 31, 1994, lists nearly 600 projects! Each piece of tax legislation enacted by the 104th Congress will, without doubt, spawn a call for more guidance. If the IRS and Treasury cannot respond to the call, the backlog will grow worse. And taxpayers will be unable to plan adequately or to comply. If the guidance process is frozen, it is taxpayers who will be left out in the cold. Instead of relieving taxpayer burden, a regulatory freeze would likely exacerbate it.

Conclusion

In summary, TEI opposes the application of a regulatory moratorium to tax regulations. We strongly urge that Congress reject legislation to impose such a moratorium and devote itself instead to improving the underlying tax laws. If you have any questions, please do not hesitate to call either [Linda B. Burke] at [phone] or Timothy J. McCormally of the Institute's professional staff at [phone].