TEI comments on providing additional capitalization guidance: November 7, 2001.
On November 7, 2001, TEI 1. (communications) TEI - Terminal Endpoint Identifier.
2. (text, project) TEI - Text Encoding Initiative. President Robert L. Ashby submitted the following letter to Assistant Treasury Secretary for Tax Policy Mark A. Weinberger, IRS An abbreviation for the Internal Revenue Service, a federal agency charged with the responsibility of administering and enforcing internal revenue laws. Commissioner Charles O. Rossotti Charles O. Rossotti (born 1941) is an American businessman, and former Commissioner of Internal Revenue. Rossotti is a graduate of Georgetown University (A.B., Economics, 1962) and Harvard Business School (MBA, 1964). , and Acting Chief Counsel Richard W. Skillman, urging the government to follow through on the Priority Guidance Plan and issue much-needed guidance on capitalization issues. The letter was prepared under the aegis of TEI's Federal Tax Committee, whose chair is Mitchell S Mitchell, city (1990 pop. 13,798), seat of Davison co., SE S.Dak.; inc. 1881. Mitchell is a trade, distribution, and shipping center for a dairy and livestock area. . Trager of Georgia-Pacific Corporation.
The Treasury Department's 2001 Priority Guidance Plan lists "guidance under sections 162 and 263 regarding the deduction and capitalization of expenditures" as a priority for the year. Tax Executives Institute concurs with the government's assessment that capitalization issues remain a high priority.
As the preeminent association of corporate tax executives in North America North America, third largest continent (1990 est. pop. 365,000,000), c.9,400,000 sq mi (24,346,000 sq km), the northern of the two continents of the Western Hemisphere. , Tax Executives Institute represents a cross-section of the business community, and is dedicated to the development and effective implementation of sound tax policy, to promoting the uniform and equitable enforcement of the tax laws, and to reducing the cost and burden of administration and compliance to the benefit of taxpayers and government alike. Our members are responsible for managing the tax affairs of their companies and must daily deal with the Internal Re, venue Service (primarily, but not exclusively, the Large and Mid-Size Business Division) and with the provisions of the tax law that define whether a particular expenditure should be capitalized or deducted.
Taxpayers, the IRS, and courts, have long struggled with the distinctions between costs that are deductible when incurred and those 'that should be capitalized. Since the Supreme Court's decision in INDOPCO v. Commissioner, 503 U.S. 79 (1992), whether a particular expense may be deducted currently or must be capitalized has become a particularly troublesome issue. (1) While the National Office has consistently said that INDOPCO did not alter the fundamental principles of capitalization, (2) the decision has been cited by IRS agents to justify adjustments capitalizing numerous expenditures, many of which have long been viewed as clearly deductible. As a result, the number, scope, and frequency of disputes between taxpayers and the IRS over such issues have escalated substantially. Indeed, the National Taxpayer Advocate identified capitalization issues as the most litigated issue for business taxpayers in the 1998 Report to Congress, and there is no sign the controversy has abated Abated, an ancient technical term applied in masonry and metal work to those portions which are sunk beneath the surface, as in inscriptions where the ground is sunk round the letters so as to leave the letters or ornament in relief.
From 1911 Encyclopædia Britannica . In addition, the IRS's Large and Mid-Size Business Division has reported that more than 25 percent of its audit resources are devoted to capitalization issues in some industries.
The core inquiry under INDOPCO is whether an expenditure produces a "significant future benefit." Expenditures producing "incidental future benefits" remain deductible, but determining whether there is a future benefit and, if so, whether it is incidental is rarely obvious or easy. To quell quell
tr.v. quelled, quell·ing, quells
1. To put down forcibly; suppress: Police quelled the riot.
2. disputes over such issues, TEI and other groups have, in the nearly ten years since the decision, submitted various analyses, recommendations, and proposals for guidance on specific expenditures. The government has responded with guidance that has been, at once, helpful and frustrating frus·trate
tr.v. frus·trat·ed, frus·trat·ing, frus·trates
a. To prevent from accomplishing a purpose or fulfilling a desire; thwart: . Each ruling has been unique and hence bereft of broader principles that can be applied beyond the limited facts in the rulings. As a result, both taxpayers and the government continue to grapple for a "unified theory Unified Theory may refer to:
Recently, a group of companies and their advisers--the INDOPCO Coalition submitted a proposal to the Treasury Department and IRS outlining an approach to future capitalization guidance. According to according to
1. As stated or indicated by; on the authority of: according to historians.
2. In keeping with: according to instructions.
3. the document, the proposal attempts to "set forth an administrable and practical framework for addressing capitalization issues by providing objective principles that draw lines between capital expenditures and deductible expenses." TEI has consistently advocated a similar approach. In addition, the proposal seeks to provide "safe harbors Safe Harbor
1. A legal provision to reduce or eliminate liability as long as good faith is demonstrated.
2. A form of shark repellent implemented by a target company acquiring a business that is so poorly regulated that the target itself is less attractive. and rules of administrative convenience that may be applied in evolving business environments without intensive analysis of each taxpayer's particular circumstances.
The proposal is a highly professional and persuasive document that can provide a useful framework for future action. As a result, TEI's Federal Tax Committee has undertaken an analysis of the myriad rules, safe harbors, and recommendations offered by the Coalition. While TEI's analysis and conclusions may ultimately differ from the recommendations in the proposal in respect of one or more substantive rules, we applaud the Coalition for developing the proposal. The group's efforts will clearly contribute to the resolution of the issues.
We urge the government likewise to consider the proposal seriously as it moves forward to effect the capitalization guidance announced on the 2001 Priority Guidance Plan.
If you have any questions or need additional copies of these comments, please do not hesitate to call Jeffery P. Rasmussen of the Institute's professional staff at 202.638.5601.
(1) Indeed, concern about the excessive scope and lack of administrable standards in the circuit court's opinion in National Starch starch, white, odorless, tasteless, carbohydrate powder. It plays a vital role in the biochemistry of both plants and animals and has important commercial uses. v. Commissioner (subsequently restyled INDOPCO v. Commissioner) prompted TEI to submit an amicus curiae brief Noun 1. amicus curiae brief - a brief presented by someone interested in influencing the outcome of a lawsuit but who is not a party to it
brief, legal brief - a document stating the facts and points of law of a client's case on the appeal to the United States United States, officially United States of America, republic (2005 est. pop. 295,734,000), 3,539,227 sq mi (9,166,598 sq km), North America. The United States is the world's third largest country in population and the fourth largest country in area.