Institute takes stand on tax shelter bill provisions. (Highlights).

The AICPA asked members who participate in the key person program to talk to their U.S. senators about certain provisions in S 2498, the Tax Shelter Transparency Act, on which, at press time, the Senate was poised to act. The AICPA strongly supports Congress's goal of curbing tax shelters that abuse our tax system.

However, the Institute expressed its concern to the Senate Finance Committee that the bill would overreach its target, resulting in a statute so broad, vague and punitive it would have a burdensome effect on normal transactions.

Because the bill elevates the reporting standard for both taxpayers and tax preparers on all return items to the very highest (the "more likely than not") standard now imposed only on tax shelter items, the AICPA said, it would affect all returns filed. In short, the proposed legislation would subject both taxpayer and tax preparer to penalties for any position reported on a business or personal return unless (a) the return specifically disclosed the position (for example, highlighted it as a potentially questionable transaction) or (b) both taxpayer and preparer reasonably believed the return position was "more likely than not" the correct position.

The AICPA recommended that Congress amend the Senate bill to retain, for tax return preparers, the present "realistic possibility of success" standard for nontax-shelter transactions and said it supported the language that raised the preparer standard on "disclosed positions" to "reasonable basis" from the present "not frivolous."