FEI Tax Committee sets agenda for '03. (Washington Insights).

In light of November's surprise election results, which saw Republicans solidify their hold on the House of Representatives and retake control of the Senate, FEI's Committee on Taxation has settled on an aggressive agenda to pursue during the 108th Congress.

Committee members agreed that two general principles would govern the agenda: 1) there must be some indication that the Congressional tax-writing committees will address the issue in the next year; and 2) the issue must be specific enough to allow FEI to play a decisive role in the outcome.

For example, while FEI certainly supports any effort to eliminate the corporate alternative minimum tax (AMT)--and will remain active in the broad-based coalition working to achieve this--we recognize that the debate will require enormous resources and will only be won by the collective efforts of numerous business groups. FEI's Tax Committee will devote the bulk of its efforts to several more targeted items:

* CEO signatures on corporate tax returns. Last year, Senate Democrats included a provision in the (failed) pension reform bill that would have required CEOs to sign their companies' federal income tax returns. In the committee report accompanying the bill, Senate staffers explained that the intent of the provision was to "elevate the level of care given to the preparation of those returns."

FEI's Tax Committee sent a letter to all members of the Senate Finance Committee urging them to remove the provision from the pension bill during floor consideration. We argued that companies already spend enormous resources preparing their federal, state and local returns. We also pointed out that 1) current law already requires a corporate officer to sign the returns under penalty of perjury; 2) returns are examined by independent parties; and 3) IRS auditors are well-equipped to detect fraudulent filings. Lastly, we suggested an alternative approach to this issue: We encouraged company boards to designate Chief Tax Officers to attest to the accuracy of corporate returns.

Fortunately, Congress did not complete work on the pension reform bill in the 107th Congress. However, most Congressional insiders believe this issue will resurface in tax shelter legislation, likely to be introduced early this year. FEI's Tax Committee has already started discussions with key House and Senate staffers in an attempt to derail the effort.

* Public disclosure of corporate tax returns. Last year, Sen. Charles Grassley (R-Iowa), the incoming chairman of the Senate Finance Committee, suggested that the general public, and, particularly individual investors, would benefit from having access to information in corporate tax returns. His proposal, though sharply criticized by both the Securities and Exchange Commission and the Treasury Department, was eventually included as a "sense of the Senate" provision in the Sarbanes-Oxley corporate governance law.

Return Data Privileged

FEI's Tax Committee strongly opposed this provision, arguing that tax return information is privileged and should be seen only by the IRS. We further argued that IRS auditors are proficient tax professionals capable of detecting fraud. As such, they already perform the "watchdog" function anticipated by this provision.

Finance Committee staffers expect Grassley to introduce similar legislation in the 108th Congress. Such legislation would likely be offered as an amendment to a much larger bill. FEI could play a crucial role in the outcome of this debate because: 1) our membership would have a great deal of credibility on this issue; and 2) we are the only association to have expressed a strong opinion on the subject.

* Extending the capital loss carryback period to five years. The Administration is developing an economic stimulus package that will likely include several provisions targeted at the business community. FEI's Tax Committee will encourage the Administration to include a provision that would lengthen the capital loss carryback period to five years, thereby generating additional cash that businesses could use to expand their operations and, hopefully, stimulate economic growth.

While the Tax Committee will spend most of its energy on these issues, we will continue to monitor broader tax issues likely to be of interest to the FEI community. For example, Congress may consider legislation to lower corporate tax rates, and to eliminate the "double taxation" of dividends. Coalitions will continue to fight for repeal of the corporate AMT and to make the R&D tax credit permanent. International tax reform will also be critical for several business groups, especially in light of the recent WTO decision finding the FSC/ETI regime to be an illegal export subsidy.

FEI's Tax Committee will report its progress to FEI members via FEI Express, the "Washington Watch" newsletter, and regular postings on the Advocacy section of FEI's Web site. If you have other, tax-related legislative items which you think FEI should pursue, please relay them to Mark Prysock, FEI's Director of Tax Policy, [e-mail].