TEI Urges Clarification Of Interest Netting Rules.

Explaining that a revenue procedure issued last year narrowly construes the interest netting statute and undermines Congress's intent to provide equitable relief, Tax Executives Institute recently urged the Senate Finance Committee to clarify the new statute.

In a June 2, 2000, letter to Chairman William V. Roth, Jr., TEI President Charles W. Shewbridge, III explained that "the enactment of section 6621(d) signalled Congress's desire to return fairness and equity to the Code's rules on charging for the use of funds." Regrettably, Mr. Shewbridge stated, Rev. Proc. 99-19 interprets the new statute quite narrowly. Specifically, the procedure provides that interest netting is not available in respect of any period during which interest was not "allowable" or "payable" by law; an example of this disallowance is the 45-day interest-free period the government has after a return is filed in which to issue a refund of taxes paid.

The IRS's interpretation runs afoul of congressional intent in enacting the interest netting provision, Mr. Shewbridge stated. He urged the Finance Committee to expand a provision in a recently passed House bill to include business taxpayers. He also urged that the provision be effective as of the date of enactment of the IRS Restructuring and Reform Act of 1998.

The Institute's comments, reprinted in this issue beginning at page 251, were prepared under the aegis of its IRS Administrative Affairs Committee, whose chair is Robert J. McDonough, Jr. of Getronics NV.