Midyear Recap and Planning for the New Millennium.

TEI is batting three for three with the Deputy Secretary of the Treasury. Two years ago, Lawrence Summers opened the Institute's Midyear Conference by laying out Treasury's five-point plan for building a better IRS. In 1998, Mr. Summers again delivered the opening keynote address and voiced the Administration's opposition to proposals to "terminate the Code." And now last month, with CNN cameras again in tow, the Deputy Secretary opened the last Midyear Conference of the millennium by discussing the Administration's proposals to create a "culture of compliance" by attacking so-called corporate tax shelters.

While expressing the Administration's concern about the proliferation of abusive tax shelters, Mr. Summers assured TEI that Treasury understands the difficulty of the task of defining the problem, and even cited Judge Learned Hand's famous maxim -- that "any one may so arrange his affairs that his taxes shall be as low as possible" -- in support of routine tax minimization efforts.

Some conference participants suggested to me that the Deputy Secretary might have quoted Humpty Dumpty -- "When I use a word it means just what I choose it to mean, neither more nor less" -- for, as Mr. Summers acknowledged, defining the difference between legitimate and abusive efforts to reduce taxes is a daunting task. Mr. Summers pledged to engage in intensive and extensive dialogue with groups such as TEI to come to common understandings of the norms of appropriate behavior.

Although there may be disagreements over the scope of the "corporate tax shelter" problem -- and certainly over the definition of"tax shelter" and the proposed "solutions" -- most thoughtful commentators agree that the tax system is facing a challenge. As tax executives, TEI members see the challenge every day, and we respond by exercising our best judgment: saying "yes" when "yes" is both proper and in the best interests of our companies, and saying "no" when the line is crossed and "no" needs to be said. Accordingly, we welcome Treasury's recognition that its proposals need refinement as well as its request for assistance.

To respond to Treasury's call for assistance, the Institute has formed a task force drawn from members of the Federal Tax, International Tax, and IRS Administrative Affairs Committees. Led by Federal Tax Committee Chair Phil Cohen, the task force will work in the coming months to help develop measured legislative proposals that safeguard the integrity of the tax system without interfering with legitimate tax planning and without unfairly hammering taxpayers that strive in good faith to comply.

All members of the Institute are invited to contribute to the process (for example, by posting their views on TEI On-Line).

Gimme Shelter & Other Conference Highlights

Corporate tax shelters were definitely the hot topic at this year's Midyear Conference. In addition to Larry Summers, we heard from Donald Lubick, the Assistant Secretary for Tax Policy, that Treasury is considering permitting companies to seek advance rulings on the efficacy of proposed transactions. And Congressman Bill Archer, Chairman of the House Ways and Means Committee, signaled that the proposals will face scrutiny from his committee, though he hinted some action was likely. Indeed, even the ranking Democrat on the committee -- Charles Rangel -- questioned whether the proposals go too far. Finally, taxpayers and tax practitioners weighed in on corporate tax shelters. Specifically, the Institute's Federal Tax and Corporate Tax Management Committees combined forces to offer what TEI is famous for -- a practical perspective on evaluating tax-advantaged products and dealing with idea providers.

Shelters were not, however, the only topic addressed. Congressional staffers discussed the future of Subpart F, and a panel of TEI members and IRS employees discussed the work of an IRS Customer Service Task Force that is focused on improving the role of specialists. TEI also heard a report on how the IRS reorganization of the IRS will affect large-case audits, and Commissioner Rossotti discussed not only the reorganization, but also the need for the IRS to promote and protect the Advance Pricing Agreement program. (Incidentally, Assistant Secretary Lubick intimated that Treasury may support a legislative fix to protect the highly sensitive APA background documents.) The Canadian Tax Committees offered advice on doing business in Canada and the State and Local Tax Committee rounded out the conference program with ways to use the legislative process effectively.

All in all, the Midyear Conference provided outstanding educational programs and late-breaking news. Thanks to the committee chairs and members who helped make it a resounding success. Full coverage of the conference will be included in the next issue of the magazine.

Strategic Plan

TEI's Board of Directors on March 20 took a major step toward preparing the Institute for the new century by approving a comprehensive strategic plan, which will help TEI continue to meet the needs of its members and grow in effectiveness. The development of a comprehensive strategic plan has been underway since last summer, and I am delighted that so many members contributed to the process. A news story about the plan, as well as the plan itself, is reprinted elsewhere in this issue.

Two New Chapters

TEI is growing by leaps and bounds. At the Midyear Conference, the Board of Directors chartered our 51st and 52nd chapters, thereby enhancing the networking experiences available to tax executives. The leap is into Northeastern Wisconsin (in and around Appleton), where TEI will be able to more effectively serve our members for whom trips into Milwaukee can be quite long.

The bound --"across the pond" to Europe -- marks a bold venture for the Institute, our first outpost overseas. Chapter membership consists not only of American tax executives on assignment in Europe, but also European nationals working for corporations in Switzerland, the Netherlands, Belgium, the UK, and France.

I look forward to members from both new chapters contributing to the Institute for years and years.

Membership Satisfaction Survey

Last fall, TEI distributed a Membership Satisfaction Survey to all members, and I am pleased to report that in all we received more than a thousand responses. We have now tabulated the results from the survey and have distributed them to the chapters for analysis. The results provide much grist for the mill, and while there is obviously room for improvement, the results generally reflect a membership that believes the Institute is on the right track. The chapter-by-chapter results, together with many very thoughtful narrative comments and suggestions, will permit us to identify not only problem areas but meaningful solutions. Indeed, I am very much impressed by the insightful comments on all aspects of the Institute's activities -- education, networking, and advocacy. After the chapters report their conclusions to the Institute's Membership Committee, I can envision many committees and task forces taking up the charge as we move to translate the recommendations into action.

As TEI approaches the Year 2000 and the implementation of the Institute's Strategic Plan, it is critical that we continually assess the needs and desires of the members. The Membership Satisfaction Survey represents a valuable tool. Your assistance in answering the survey was absolutely invaluable, and I thank you for your help.

Kudos

I want to commend the State and Local Tax Committee for the Supreme Court victory in the South Central Bell case, which (finally!) held the Alabama franchise tax on foreign corporations unconstitutional. Many years ago, TEI urged the Court to review the issue, but was disappointed when a writ of certiorari was denied in the General Motors case. We persisted, however, by filing amicus briefs last year in support of the petition and on the merits when South Central Bell also sought relief from the discriminatory tax.

In March, the Supreme Court unanimously agreed with TEI's longstanding position -- that the Alabama tax impermissibly discriminated against out-of-state corporations in violation of the Commerce Clause.

Now, if we can only get Alabama to refund the monies it has illegally collected over the years....