At 60, TEI's vision remains vital and strong.

Tax Executives Institute was founded 60 years ago on the straightforward notion that in-house tax professionals could benefit from an organization devoted to their unique needs. Whether the issue was how the tax function in a company should be organized; how tax executives should interact with upper management, the company's audit firm, and its retinue of outside advisers; or what steps tax executives should take in light of changes in the laws or attendant rules and regulations, the thought was that tax executives could both learn from and teach their similarly situated and like-minded colleagues. A review of the Institute's recent activities affirms the validity and robustness of that vision.

Tax Department Survey Underscores Value of Staying Connected

One of TEI's major initiative this past year was a survey of corporate tax departments. The data-collection phase of the project is complete, and we are in the throes of analyzing the results. I thank Ray Rossi for his leadership on this project, and also extend the Institute's appreciation to Lynn Jordan, who just completed a two-year stint as chair of our Corporate Tax Management Committee and spearheaded the survey effort. (Lynn is currently a member of our Executive Committee.)

The Corporate Tax Department Survey updates a survey we conducted more than a decade ago. Based on our preliminary analysis, we will be mining the results for months and years to come. The overall results will be published by the end of the year, and will be made available to all members. (Those who participated in the survey will receive the results for free; others will be asked to pay a modest fee.)

A few results to whet your appetite:

* Our response rate was astounding. Approximately 57 percent of the senior tax executives we surveyed completed the questionnaire. In all, we received benchmarking data from nearly 1,500 companies. (Our vendor told us a 25-percent response would be good.)

* The titles of our senior executives are almost evenly split between Director of Tax or Corporate Tax Director and Vice President, and by far, our members report to their company's CFO.

* About 10 percent of us run one-person shops, while 41 percent work in departments having 2 to 5 people. Only 3 percent have more than 50 full-time tax department personnel.

* We did not need a survey to confirm it, but we are also a hard-working lot. The average tax executive works approximately 2300 hours per year. Forty-one percent of us saw an increase in tax staff over the past three years, whereas another 41 percent reported no change.

* In the planning area, we deal with tax incentives, M&A work, transfer pricing, and R&D credit planning. Not surprisingly, most of this work is performed in-house.

* Finally, we are pretty evenly split in the review of our tax returns, with 45 percent having no outside review and 43 percent being reviewed by our audit firm. Sixty-nine percent are subject to the corporate governance provisions of the Sarbanes-Oxley Act. Interestingly, 12 percent have seen an increase in the use of their external audit firm, while 37 percent have decreased. A little more than 10 percent of us no longer use our audit firm for tax services.

We are just beginning to analyze the survey data. The final report will have more than 12,000 different subject-matter tables. We will breakdown the results by revenue, size of department, and industry (among other things). And the information will be distributed in both print and CD-ROM, enabling our members to slice and dice the results as they see fit.

Financial Accounting Rules and Relationships Take Center Stage

Tax executives have long been mindful of the financial accounting rules. Developments in recent months, however, have underscored the transcendent nature of financial accounting issues in the tax world. Front and center, of course, is the Sarbanes-Oxley Act. The Act not only affects what tax services audit firms can provide to their clients, but what audit firms are requiring from those clients in order to meet the new require ments imposed by the PCAOB. It's not confined to Sarbanes-Oxley, however. New Schedule M-3 and the IRS's continuing push on tax shelters, including its scrutiny of practitioners and renewed interest in tax accrual workpapers, also play a role. So do the FASB's projects on FAS 109 (especially the rules relating to uncertain tax positions) and APB 23, as well as the FAS-IAS convergence movement.

TEI's involvement in the financial accounting arena is multi-faceted. We are seeking to educate our members; to explore, clarify, and refine the relationships that our companies have with their outside auditors (and other tax service providers); and ultimately to engage--and persuade--government leaders. For example, to help our members be current and stay current, in November our Federal Tax Committee is holding a high-impact, two-day seminar on financial reporting in the age of transparency. The response to the seminar offering has been overwhelming--in a few short weeks, well more than 250 tax executives have registered for the seminar, and it is likely we will have to turn people away. (The materials from the program will be available to those who cannot attend.)

Education, however, is only the first step. TEI is also working to give its members a voice in the revision and refinement of the applicable financial accounting rules. We have established a special task force on financial accounting rules--led by Neil Traubenberg, who also chairs our Federal Tax Committee--to sort through how TEI can most effectively advance our members' common interests. An initial focus of the group is the impending changes in FAS 109 and, in particular, the possible importation of FAS 5's probability standards into how uncertain tax positions are reported on financial statements.

We will also continue our work on new Schedule M-3, stay engaged with the Large and Mid-Size Business Division on how the push for greater transparency plays out in the audit process, and be prepared to respond to proposals from the Public Company Accounting Oversight Board on the relationship of companies (and audit committees) with their auditors.

Giving Voice to Corporate Concerns: The 2004 Tax Bill and What Lies Ahead

The recently passed corporate tax bill will not only bring tax relief to significant portions of the business community, but will also spawn myriad guidance projects from the IRS and Treasury. The decisions that Congress made --including some proposals and excluding others--also set the stage for 2005.

I am proud of TEI's work on the tax bill. To be sure, we did not engage on every issue or prevail on every point we addressed, but the final bill is better for TEI's involvement. For example, the conference agreement rejected the burdensome CEO signature certification, laid aside the proposed codification of economic substance and broadening of section 269, and did not change the Code's treatment of fines and penalties--all issues that TEI voiced concerns about. I also believe that we played a role in staving off the establishment of an IRS Whistleblower Office, under which audits could be triggered by competitors, gadflies, or disgruntled former employees. (Not a pretty thought, I think, for either taxpayers or the IRS.)

TEI's success in 2004, however, does not mean the battles will not be waged again in 2005--regardless of who wins the presidential election. Please be assured that the Institute remains committed to giving its members a voice in the legislative arena. Of more immediate concern, however, is being heard on how the 2004 legislative changes will be implemented. From the need to provide guidance on what constitutes manufacturing profit to the repatriation of foreign profits to the new penalties relating to tax shelters and the enactment of much needed international reforms, the bill places the IRS and Treasury--and taxpayers, too--behind the eight ball. I invite your suggestions on what the government's guidance priorities should be and, equally important, the shape and direction of that guidance. Please send your ideas to [e-mail]. Better yet, please log on to www.tei.org, and post your comments in one of our issue forums.

One other advocacy project deserves mention. In September, I was pleased to represent TEI at a hearing before the Senate Foreign Relations Committee on the Netherlands and Barbados tax treaties. This marked the first time TEI has testified before the Foreign Relations Committee, and I am pleased to report that, following the hearing, the Senate did ratify the Barbados treaty. Regrettably, at this writing, the Dutch treaty remains on hold.

Concluding Thoughts

For TEI to be effective and stay effective, we need the feedback--the involvement--of as many members as possible. Please let us know how we're doing, either by calling me at 847.735.4687 or by sending an email message to [e-mail]. By working together, we can build upon the successes of the Institute's first 60 years.

Acknowledgment

Tax Executives Institute expresses its appreciation to the following firms that have become Platinum sponsors of the 2004 Annual Conference:

Baker & McKenzie Deloitte & Touche LLP Ernst & Young LLP KPMG LLP Mayer, Brown, Rowe & Maw LLP McKee Nelson LLP PricewaterhouseCoopers LIP RIA Taxware, L.P.

Judith P. Zelisko International President