Building Upon Successes Through Collaborative Efforts.

One of the Institute's strategic objectives for the year is to review TEI's advocacy process with a view toward more effectively promoting the Institute's "successes" and improving the means of achieving our advocacy goals. Ray Rossi of the Santa Clara Chapter has agreed to chair a task force on this objective, and the group has begun benchmarking with other organizations and developing a list of possible solutions. The task force is also carefully reviewing the many recommendations submitted by members as part of a recent Membership Satisfaction Survey. (A summary of the survey results is reprinted in this issue.)

Although I am confident that the Advocacy Task Force's report will contain many practical suggestions for improving TEI's effectiveness, it would be a mistake to conclude that the Institute is sitting back and waiting for the group to complete its work. Indeed, not only have TEI's committees scored some noteworthy advocacy successes in recent weeks, but we are also experimenting with how we can better promote the members' interests.

Advocacy Successes

For example, this summer after the House Committee on Appropriations voted to slash the IRS's funding, TEI stood up and firmly said "no." Well before any other tax organizations came forward, the Institute wrote key leaders of Congress to press them to remain true to the spirit of IRS reform and restructuring. We argued, effectively I believe, that if the IRS is to modernize itself and increase its level of customer/taxpayer service, it needs sufficient funding to do so. Obviously, we were not alone in urging that the IRS's funding be restored, and I am pleased to report that the legislation, as passed by Congress and sent to the President, was in line with TEI's recommendation.

I am also pleased that the on-again, off-again tax bill contains an Institute-supported provision to protect the confidentiality of advance pricing agreements and related documents. Although it is unclear when the provision will be enacted, with both the Administration and Congress in favor of keeping APAs confidential, it seems likely that the threat to the APA program posed by BNA's disclosure lawsuit has been circumscribed. (Note: At a recent status hearing in the BNA-IRS lawsuit, the court asked whether TEI supported the government's motion to hold a disclosure order in abeyance until the legislative process was completed; our counsel, who attended at the Justice Department's request, emphatically answered yes.)

Still another success lies in the state and local area. On September 28, the Supreme Court of the United States granted a writ of certiorari in the Hunt-Wesson case, which involves the constitutionality of California's interest offset rule. The case, which will test how much (if any) discrimination against out-of-state companies is permissible under the Commerce Clause, will be heard early next year. My congratulations to Amy Eisenstadt and other members of the State and Local Tax Committee for their work on an amicus brief in the case.

New Ways of Doing Business

In this issue, we reprint TEI's recent letter to the National Taxpayer Advocate on the significant problems confronting corporate taxpayers. Not surprisingly, the Institute sings a common refrain -- that complexity of the law is the biggest problem facing taxpayers. What is uncommon, however, is that TEI has decided to explore alternative means of communicating its message to Congress and the Administration. Specifically, the Institute has undertaken a project with both the Tax Division of the American Institute of Certified Public Accountants and the American Bar Association's Section of Taxation to identify those provisions that are good candidates for simplification and to collectively press for change. Although skepticism has long been expressed whether there is a "constituency" for simplification, I am confident the three groups can reach consensus on a Top 10 or Top 20 list of provisions. Congress, then, will have to take note.

This marks a departure for TEI, which historically has "gone it alone" in advocating the views of its members. Although there are some risks to collaborative efforts such as our joint simplification project, the Institute's leadership believes the potential benefits make the effort worthwhile. Stated differently, there may be a thousand reasons not to move ahead with this project, but one very important one why we should: It's the right thing to do.

The significance of this joint effort, moreover, goes beyond the simplification initiatives we may champion. If successful, the project may point the way to other collaborative endeavors, and thereby permit us to enhance the Institute's effectiveness. Indeed, the strategic plan calls for us to reexamine our general policy against joint efforts, and the Advocacy Task Force will be very interested in the results.

Finally, TEI has met separately with representatives of the ABA and the AICPA to explore whether there is common ground between how TEI and the two organizations are approaching the corporate tax shelter issue. (These meetings followed up on meetings this summer with the Treasury Department and Joint Committee staff.) The three professional organizations have varying levels of concern about the ambiguous definition of corporate tax shelters and whether and how any new disclosure regime would operate (and on whom any new disclosure requirements would be imposed). There is particular sensitivity in respect of the proposal to require a senior corporate officer to attest to the facts surrounding certain transactions, which has been called the linchpin of the ABA's proposals. TEI has voiced concern about the tax policy and tax administration implications of the attestation provision. In my view, the proposal unjustifiably impugns the integrity of tax executives and threatens to turn tax audits into even bigger battlegrounds (as the IRS scrutinizes and possibly imposes penalties in respect of the attestation rather than the underlying transaction). By engaging our colleagues in these other associations, we can avoid misunderstandings and, I believe, improve the proposals that ultimately come before Congress. The Institute will continue to look for opportunities to meet not only with government representatives but with other interested stakeholders on this important issue.

Helping the Modernized IRS "Stand Up"

During the past year, TEI has met with numerous IRS design teams in an effort to help the IRS effectively reinvent itself. Institute representatives have reacted to proposals on everything from the organization of Chief Counsel to the establishment of a pre-filing agreement (or domestic APA) process to ensuring the independence of Appeals. We have also dealt extensively with the question of how liaison activities between TEI's local chapters and the IRS will have to be adapted when the IRS shifts from a geographical to an industry orientation. I am pleased with how our IRS Administrative Affairs Committee and membership generally have responded to the call, often on short notice, and provided the IRS with candid, and helpful, comments.

The IRS's modernization efforts are proceeding apace, and I think TEI members can be proud that one of our own -- Larry Langdon of the Santa Clara Valley Chapter -- has been selected to run the new Large and Mid-Size Business operating division. Larry served as TEI's president a decade ago, and he takes with him to the IRS a wealth of experience. At our Annual Conference, in Philadelphia, TEI will honor Larry for his service to the Institute and to the tax community. Then in January, TEI will cosponsor a modernization conference in Washington in which Larry and other top officials of the new IRS will participate. (Among the other sponsors will be the IRS, ABA, AICPA, the National Association for Enrolled Agents, and the American Tax Policy Institute.) Watch for details about the modernization conference in the November-December issue as well as on TEI On-Line.

All Things Considered...

When you receive this magazine, plans for the 54th Annual Conference will be nearly complete. From our keynote speakers to our technical sessions, from our industry sessions to our social activities, the program promises to be top notch. Please join me, because upon reflection, you cannot help but agree that, all things considered you will rather be in Philadelphia.

Charles W. Shewbridge, III International President