Tax Executives Institute - U.S. Department of Treasury liaison meeting; minutes December 1, 1994.

On December 1, 1994, Tax Executives Institute held its annual liaison meeting with the Assistant Secretary of the Treasury for Tax Policy and other senior representatives of the Treasury Department's Office of Tax Policy. The agenda for the liaison meeting was published in the January-February 1995 issue of The Tax Executive. The minutes of the meeting are set forth below.

I. Introduction

On behalf of the U.S. Treasury Department's Office of Tax Policy, Assistant Secretary Leslie B. Samuels welcomed the delegation from Tax Executives Institute. On behalf of Tax Executives Institute, TEI President Linda B. Burke thanked the Treasury for meeting with the Institute.

II. Opening Remarks

Assistant Secretary Samuels referred to the Senate vote that would take place later in the day on the Uruguay Round accord of the General Agreement on Tariffs and Trade (GATT). He observed that the Treasury has been focusing a lot of its attention on the GATT legislation and is optimistic about its passage, adding that the agreement is an "important step" for the country. (Editor's Note: The GATT legislation passed the Senate later that day.)

With respect to forthcoming guidance, Mr. Samuels remarked that a "flurry" of regulations would be issued before the end of 1994. Treasury has tried to space out the guidance more evenly throughout the year, he said, but the process inevitably promotes year-end issuance. Mr. Iwry noted that the section 162(m) regulations, relating to the $1 million limitation on the deductibility of executive compensation, were released to the public earlier that day. It is important to issue the regulations expeditiously to enable corporations to prepare their proxy statements, he stated. Mr. Samuels noted that Rev. Rul. 94-77, relating to the deductibility of severance payments in light of the INDOPCO decision, was also issued that day.

Mr. Samuels stated that Treasury is seeking guidance in developing a priorities list (or business plan). He invited TEI's comments on what regulatory projects should be given priority in 1995. He added that the request did not represent a "one-shot" deal; Treasury recognizes the importance of getting guidance out to taxpayers and wants to hear the Institute's comment-on particular projects and priorities generally-throughout the year. Referring to Senator Dole and Representative Gingrich's suggestion that a moratorium be imposed on the issuance of regulations, Mr. Samuels stated that the message Treasury hears is that taxpayers want more guidance. If TEI shares that view, he suggested it consider communicating its position to Congress.

Ms. Burke noted that the liaison meeting with Treasury has been accelerated to December to permit the Institute

to work more effectively with the Office of Tax Policy on important issues, including the setting of regulatory priorities. She referred to a recent speech by Ms. Beerbower in which she identified six fundamental issues affecting the further development of the tax law.(1) Ms. Burke agreed that the six questions raise "huge" tax policy questions adding that relevant guidance is undeniably needed in these areas, as well as in a number of other areas (including the tax provisions of the GATT accord). Finally, Ms. Burke echoed Mr. Samuels's view that the application of any rulemaking moratorium to the tax realm would be counter-productive. (Editor's Note: TEI subsequently filed comments with the appropriate committees of the 104th Congress opposing the extension of any moratorium to IRS and Treasury regulations.)

III. Improving the Legislative Process

Ms. Burke referred to the Institute's written agenda which recommends ways to improve the legislative process. She questioned the efficiency and fairness of the process used to develop funding proposals for the GATT accord, which was marked by skeletal descriptions of proposed changes and media reports on what was (and was not) adopted and why. She suggested that the truncated process presents a prime example of how legislation should not be developed.

Mr. Samuels acknowledged that the GATT process was less than optimal and said that Treasury, too, is unhappy with the overall process. He explained that the GATT funding proposals represent a "special situation," especially given the "fast-track" rules Congress adopted in respect of the trade accord. Referring next to the Institute's submissions on three funding proposals, Mr. Samuels assured TEI that its views were taken into account as the process moved forward.(2) The points TEI made were thoroughly discussed, he stated. Although he believed it would be "unusual" to use the same process again, Mr. Samuels conceded that he cannot predict the future of the "fast-track" or "pay-as-yougo" process. (The same procedure was used in respect of the North American Free Trade Agreement, but nothing is on the horizon calling for the use of the fast-track procedure.) Treasury understands taxpayers' concerns with both the proposals and the process itself, he said and reiterated that comments on the GATT funding proposals were fully "vetted" by the Administration and the committee staff.

Ms. Burke emphasized the need for Treasury and taxpayers to work together to develop a process to produce better results, as well as a strategy for ensuring that proposals impairing principles of sound tax policy and administration are either rejected or revised. Mr. Murphy noted that when NAFTA was considered stakeholders were more fully brought into the process, and positive changes were made as a result.

Mr. Samuels said he felt compelled to defend the GATT legislative process. He explained that the GATT funding proposals were developed on a bipartisan basis. The Treasury staff and congressional aides were well aware of the pros and cons of the proposals, he said, adding that the Republican leadership signed off on the funding mechanisms. Ms. Burke reiterated that many companies supported the GATT, but TEI believes that issues of administrability and compliance should be given more attention. She concluded that the Institute wants to ensure that the rules work in the "real world."

IV. Improving the Tax Treaty Process

Ms. Burke noted that the Institute's biggest concern with the treaty process is the level of taxpayer participation. She specifically referred to Treasury's recent submission of seven tax treaties and protocols for Senate approval.(3) She observed that the Institute has urged the Senate to ratify the accords, but believes earlier taxpayer involvement would not only improve the final product, but facilitate the ratification process (by building a solid foundation of support).

Mr. Bergquist confirmed TEI's desire to become more involved in, and be more supportive of, the tax treaty process. He predicted the business community would be more supportive of pending treaties if it had more input in developing the U.S. negotiating position or in the negotiations themselves. Business taxpayers can play a valuable role in the negotiation process, he said, citing business disappointment about the treatment of trademark royalties under the protocol to the U.S.-Canada Treaty.

Ms. Beerbower explained that the Canadian protocol was a difficult one to negotiate. The United States pushed for a zero withholding rate on all royalties, but Canada insisted on drawing a distinction between technology/know-how and the licensing of a franchise's trademark. The Canadian government argued that trademarks do not add anything to the Canadian economy, as contrasted with patents or other intellectual property. Ms. Beerbower reported that the Treasury hopes to provide in the technical explanation for the allocation of amounts between technology and trademarks. She clarified that the final language in the protocol is not the result of a misunderstanding between the parties concerning the reach of the royalties provision. Rather, while Treasury did not oppose a broad . article, its first priority was reducing the withholding rates on interest and dividends.

Ms. Beerbower referred to the treaty negotiations as a "very tough process" that is -- and must remain -- essentially a country-to-country process. She expressed concern that the United States would lose some flexibility and strategy in focus if its negotiating position were made public. Mr. Samuels observed that the business community's support of the treaty process has not been constant. Ms. Beerbower stated that a certain complacency may develop, adding that Treasury needs the support of the business community in negotiating treaties, especially in Canada. Ms. Burke noted that the Institute would raise the issue with representatives of the Canadian Department of Finance during the Canadian liaison meetings the following week. Mr. Bergquist asked whether Treasury's views on the risk of publicly disclosing its negotiating position augurs w ell for the early release of a new U.S. Model Income Tax Treaty. Ms. Beerbower said that Treasury certainly wants the comments of the business community, but that it is rethinking precisely how to proceed in this area.

Mr. Hutchison said that the desire for balanced rules in respect of foreign- and U.S.-based taxpayers plays itself out in other areas as well. For example, a question exists whether a foreign law bankruptcy (or insolvency) proceeding falls within the scope of section 382(l)(5) which provides an exception to the loss limitation rules in respect of a "title 11 and similar case." Mr. Samuels deferred discussion of the issue, noting that it affects a TEI member who has raised the issue directly. Mr. McCormally said TEI certainly understood the desire not to discuss the matter at the meeting. He added that the section 382(l)(5) issue might easily affect a number of taxpayers; it is for that reason that the item is referenced in the Institute's agenda.

Returning to the treaty negotiating process, Mr. Bergquist asked how the Institute can become better attuned to Treasury's concerns and intentions, and ensure that its views are given due consideration. Ms. Beerbower stated that future negotiations would involve Switzerland, Luxembourg, South Africa, and possibly Turkey. Ms. Burke then asked at what point taxpayers should become involved in the process.

Ms. Beerbower replied that it would be helpful to know what treaties taxpayers believe should be placed on the priority list. For example, Treasury is considering focusing on South America, the Far East and Vietnam. She asked whether those choices are acceptable. In addition, if taxpayers have an interest in trademark royalties or other particular items, they should let us know, she said. Treasury needs to know where help is needed, she added. Once the governments begin negotiations, however, they generally do not publicize them.

Mr. Ezrati suggested that multinational corporations could assist in the negotiations by communicating their concerns to the foreign governments. Ms. Beerbower questioned whether such an approach would be helpful, repeating that the negotiations must be government-to-government. She explained that the important thing is for corporations to encourage foreign countries to work with the United States; corporations need to show they care about treaties. Mr. Bergquist said the Institute will canvass its International Tax Committee to determine a priority list for treaty negotiations. Mr. Samuels added that Treasury also needs to hear about countries where companies are experiencing tax problems in conducting business and where, if necessary, Treasury may wish to pursue a remedy.

IV. proving the Guidance Process

A. Capitalization Issues. Mr. DeLuca referred to the Institute's concern about the interpretation and application of the Supreme Court's decision in INDOPCO v. Commissioner, which requires the capitalization of items producing a significant future benefit. He commended the IRS for issuing Rev. Rul. 94-77, relating to the deductibility of severance pay, and three previous rulings on related issues, each of which confirms that the Supreme Court's decision did not substantially change the law of capitalization. Although the rulings are helpful, Mr. DeLuca quipped, taxpayers are frustrated that the only word that seems to be getting down to IRS examiners is not to use the word INDOPCO in setting up adjustments.

Mr. DeLuca presented an example of the citation of INDOPCO's future benefit language in relation to the deductibility of debt extinguishment costs. Based on court opinions, as well as Treas. Reg. [sections] 1.163-4(c)(1), taxpayers have generally deducted as interest any premium paid to extinguish a debt, yet agents are now contending that the premiums must be capitalized when the extinguishment takes place during an acquisition. He suggested that the analysis is inconsistent with the IRS revenue ruling on severance pay. Mr. DeLuca also noted that IRS agents have tried to capitalize employee training costs, especially in the context of re-engineering. He called such costs analogous to advertising -- the subject of both regulations and a post-INDOPCO, taxpayer-favorable revenue ruling. Virtually all ordinary business expenses have some long-term benefit, he concluded.

Mr. Navin cited slotting allowances as another area where the field seems confused about the IRS National Office's position on capitalization. He explained that two years ago a draft of an ISP paper was released. Since that time, taxpayers have worked with the industry specialist to understand the pertinent factual situation, to refine the legal analyses, and to revise significantly the draft position paper. Notwithstanding these developments, agents continue to rely on the first draft of the position paper.

Mr. Kohl acknowledged that the INDOPCO decision is not easily administered. The revenue rulings show that Treasury is trying to interpret the "future benefits" language of the decision reasonably. There is a "tough line" to be drawn, he said, and even as pending questions are answered, more will be raised.

Mr. Shewbridge returned to the comment made by Mr. DeLuca that virtually all expenditures have some future benefit (including, he noted, salaries of tax department personnel). That is precisely the problem, Mr. Kohl stated, adding that there is a limit to how far the decision can be pushed. He repeated that the INDOPCO decision "does stand for something." Determining what that "something" is, is difficult.

Mr. Navin stated that the rulings thus far have been helpful, stressing the need to get the examining agents "on board." Ms. Dunn remarked that Treasury is preparing its priorities list for 1995. She asked the Institute for input concerning what capitalization issues should be placed on that list, keeping in mind the limited resources of the agency. (Editor's Note: The capitalization issue was also discussed during TEI's December 2 liaison meeting with the IRS and it was subsequently determined that TEI's involvement in this issue should be coordinated through the IRS.)

Ms. Beerbower explained that Treasury is becoming more involved with the training of agents, noting that she had recently met with international examiners. She observed that the examining agents are the "consumers" for what Treasury does. Mr. Guttentag added that Treasury's recent focus has been on training in international issues, but it welcomes TEI's comments on whether its focus should be expanded to other subjects. Mr. Murray said TEI was encouraged by what Treasury is doing, urging the government not to limit the training to international issues.

B. The Role of Anti-Abuse Rules. Mr. Murray referred to the agenda's discussion of the potential ill effects of the recent proposed partnership anti-abuse regulations. He stated that TEI (and taxpayers) are concerned that the breadth of the rules may prompt examiners to view the flow-through effect of any partnership as abusive. The characterization of an entity as a partnership is not necessarily black and white, Mr. Murray said; there are often shades of gray. Taxpayers are caught in the middle and need more guidance on what is acceptable and what is not. (Editor's Note: The final anti-abuse regulations were issued on December 29, 1994.)

Ms. Beerbower said that some partnership deals bear a strong resemblance to the abusive tax shelters of the 1970s and 1980s. She cautioned that companies need to read carefully the opinion letters written for the investment bankers. She stated that there is no risk in giving such opinions, citing a recent advertisement for a deal promoted by an investment banking firm; the opinion says precious little about how the law will apply to the specific facts of the deal -- it merely adds a veneer of legitimacy that may not be justified by the facts. Thus, the "hard call" must be made by the investor, she said, noting her surprise at the lack of skepticism among some taxpayers when they are approached about these deals.

Mr. Hutchison conceded that many offerings are beyond the pale, and tellingly observed that the deals are generally presented to the chief executive officer or finance officer, not the tax director. Ms. Beerbower suggested that the anti-abuse rules help tax executives by providing them with a basis for saying that the deal does not work. Mr. Hutchison agreed that the regulations may help in eliminating "extreme" deals, but he returned to TEI's central point: their effect on routine, "everyday," non-abusive structures used by companies. Ms. Burke agreed, stating that companies cannot avoid using joint ventures (often because of the demands of global competition and limitations of local foreign law). She explained that taxpayers often use partnerships where they own less than 80 percent of an enterprise to obtain the "flow-through" effect. Is this abusive? she asked. Ms. Beerbower replied negatively.

Mr. Kohl acknowledged that Ms. Burke had identified the toughest challenge for the government: not interfering with legitimate deals. Mr. Kohl stated the agencies are refining the regulations to achieve a better balance. There will always be borderline cases. He remarked that it is important for the tax system to have people exercising judgment, although Treasury understands the pressure on tax directors.

Mr. Getz expressed a need to clarify how the rules work. Is tax planning permitted? he plaintively asked, adding that "common sense" guidance should be directed at the field. Mr. Kohl noted that the government has announced its intention to coordinate partnership audits in order to guard against the possibility of inconsistent applications in the field. He said the final regulations will permit taxpayers to say, "I want flow-through treatment." Ms. Dunn noted that every regulation balances the clarity of bright-line tests with the flexible nature of general rules. She called TEI's concern wholly appropriate, adding that Treasury welcomes specific recommendations for improvement. Mr. Kohl confirmed that final regulations will provide more examples in response to taxpayer requests.

Ms. Beerbower noted that Canada has a broad anti-abuse statute and inquired whether it poses problems similar to those forecast in respect of the partnership rules. Mr. Hutchison replied that, while there are a proliferation of anti-abuse rules throughout the Internal Revenue Code, Canada has only one such rule. He stated that the general anti-avoidance rule (GAAR) was introduced a number of years ago and that the Canadian government is still grappling with providing taxpayers with guidance on the reach and application of the statute.

Mr. Getz questioned whether saving U.S. taxes should be viewed as a legitimate business goal, just as reducing foreign taxes is viewed as proper. Mr. Kohl stated that he would be interested in receiving comments on the reduction of U.S. taxes as a normal business practice, adding that -- depending on how the issue is framed -- the concept calls into question the vitality of the business purpose rule. Ms. Dunn added that the issue is not new; the government has been dealing with the "line-drawing" question since before Gregory v. Heluering was decided in 1935.

Mr. Adams reiterated the concern that, in the absence of circumscribing guidance, examining agents might be emboldened to challenge all manner of partnership structures. Mr. Kohl stated that the government hopes the recent notice concerning coordination will solve any problem at the field level. Ms. Dunn added that taxpayers should be assured that the regulations are not going away, though they will be refined to address concerns raised by TEI and others.

Mr. Getz pointed out that the expansion of international trade, enhanced by the GATT agreement, will increase the use of joint ventures. Taxpayers need Treasury's help to ensure that U.S. tax rules not become barriers to trade, he said. Ms. Beerbower agreed that integration of the tax system will continue to be a "big picture" item, adding that the market forces are pushing toward integration. Mr. Kohl confirmed that "tax planning is part of the landscape."

C. Lobbying Disallowance Rules. Mr. Ezrati said that TEI is concerned that section 162(e), relating to the disallowance of a deduction for expenditures relating to the lobbying activities, is unworkable and that the statute's administrability is not enhanced by the applicable proposed regulations. He noted that there are opportunities to make the statute less burdensome. He cited the special imputation rule for volunteers and the presumptions of lobbying and non-lobbying purposes as examples of rules that just do not work. He recommended the adoption of a primary purpose test to ameliorate some of the unadministrability of the statute.

Ms. Burke stated that she on average receives at least one call from business units or other companies per day about an interpretation of the rules. She explained that the individuals required to keep records simply do not understand how the rules work. Tax departments are trying to get it right, she said, but compliance is often not within their control.

Ms. Dunn agreed that the lobbying disallowance statute is difficult to administer. Congress made certain decisions in drafting the statute, and Treasury and taxpayers have to live with those decisions. She expressed concern that if regulatory rules such as the one rendering direct contact lobbying ineligible for the de minimis exclusion were changed, the most effective forms of lobbying (direct contact) may fall outside the reach of the statute. Treasury is taking taxpayer comments seriously, she said, adding that the government understands the concerns taxpayers have with the presumptions. Mr. Thomson suggested that the Institute's real complaint is with the statute, not the regulations. It would be harder to comply without regulations, he said. Mr. Thomson also disputed the characterization of the presumptions as a "look-back" rule. Ms. Burke noted the Institute's disagreement with the latter two statements.

Mr. McCormally expressed frustration over the statements that the problem lies with the statute, not the regulations. Treasury participated fully in the development of the statutory provision and retains authority to propose legislative corrections. Ms. Dunn responded that the revenue lost from any amendment or repeal would have to be replaced. The statute was "scored," she said.

D. Substantiation of Charitable Contributions. Ms. Burke next referred to section 170(f)(8) of the Code, relating to the substantiation of charitable contributions of $250 or more. She noted the high level of corporate giving in amounts greater than $250 and the administrative burden of obtaining receipts would be extraordinary. Subchapter C corporations are not the target of the statute, she said, and should be exempted. She added that such an exemption would be consistent with the legislative history.

Ms. Dunn thanked TEI for its written and oral comments. She said that Treasury is reviewing the issue, although she personally disagrees that Treasury has the authority to grant an exemption. Final regulations would be issued next year, she stated, adding that Treasury is considering the development of a more generous de minimis rule.

D. Consolidated Net Hedging Regulations. Mr. DeLuca referred to the final and the new proposed hedging regulations under sections 446 and 1221 (which were issued in July). He commended Treasury for its clarification of the treatment of many routine business hedges.

With respect to the proposed regulations on the timing of recognition and character of hedging transactions by members of consolidated groups, Mr. DeLuca recommended that the proposed rules in respect of "net" hedges by affiliated groups filing consolidated returns be applied, at the election of the taxpayer, on a consistent and retroactive basis to open tax years.

Mr. Kohl stated that taxpayers often complain when rules are made retroactive. He called TEI's comments "reasonable," however, and agreed to review the issue. (Editor's Note: TEI discussed this issue with the IRS at its liaison meeting the next day and has had a follow-up discussion with that agency.)

V. Status Reports

During the meeting, TEI requested a status report on the following projects:

A. DASTM Rules. Mr. Bergquist noted that taxpayers are still awaiting the issuance of the transition rules for the dollar approximate separate transaction method (DASTM) regulations under section 985. Ms. Beerbower admitted that the DASTM rules are not high on Treasury's priority list, noting that the complex rules have stirred strong interest among a very few taxpayers, but that "the rest of the world doesn't know what's going on." (Editor's Note: TEI filed additional comments on the DASTM rules on February 22, 1995.)

B. GAAP E&P Method Regulations. Mr. Bergquist next referred to the issuance of final regulations concerning the use of generally accepted accounting principles (GAAP) in the calculation of earnings and profits (E&P) under sections 952 and 964. Mr. Guttentag suggested that issuance of the final regulations requires a legislative change to the Subpart F rules. Mr. Bergquist noted that the Subpart F issue (i.e., whether GAAP rules may be used to calculate Subpart F income) is separate from whether it is proper to move forward on the proposed regulations that were issued in 1992 (which relate to the use of GAAP solely for E&P purposes). Mr. Guttentag stated that the project was not on Treasury's business plan for the current year and would most likely be completed in 1995. (Editor's Note: TEI filed supplemental comments on this issue with Treasury on February 9, 1995.)

C. Section 905(c) Regulations. Mr. Guttentag noted that Treasury is still considering a problem relating to integrated tax systems in respect of the final section 905(c) regulations. He suggested TEI take the issue up directly with Deputy International Tax Counsel Carol Doran-Klein, adding that the project is not very active.

D. Section 6662(e) Penalty Regulations. Mr. Guttentag noted that Treasury is still receiving comments from U.S trading partners in respect of the proposed section 6662(e) regulations. He recommended that taxpayers adopt a "wait and see" approach to these regulations.

E. Subpart F Regulations. Mr. Guttentag explained that Treasury hopes to finish drafting the final Subpart F regulations during December and to issue the regulations in early 1995.

F. U.S. Model Income Tax Treaty. Mr. Guttentag expressed interest in receiving comments on the U.S. Model Income Tax Treaty, especially with respect to treaty issues applicable to specific countries. He noted that Treasury needs to know how the current treaties are working. Mr. Guttentag added that the more information it has, the better Treasury is able to negotiate with the other country. We can try to use the treaty-negotiation process to address country-specific issues, he said.

Reiterating the concern she expressed earlier about publicizing Treasury's negotiating position, Ms. Beerbower said that Treasury needs to know industry's views. Mr. Guttentag encouraged the Institute to schedule a follow-up meeting with Warren Crowdus, an attorney-adviser in the Office of International Tax Counsel, to discuss treaty priorities and issues.

G. Section 163(j) Regulations. Mr. Guttentag stated that regulations under section 163(j) of the Code, relating to the application of the earnings stripping rules to guaranteed debt, should be issued in 1995.

VI. Conclusion

On behalf of the Treasury Department, Deputy Assistant Secretary Beerbower thanked the TEI delegation for taking the time and effort to prepare for the meeting. She noted that Treasury and TEI had made a lot of progress during the meeting and stated that she looked forward to working with the organization. Ms. Burke then thanked the Treasury representatives for meeting with the Institute.

RELATED ARTICLE : Treasury Delegation

Leslie B. Samuels Assistant Secretary

(Tax Policy) Cynthia G. Beerbower Deputy Assistant Secretary Glen A. Kohl Tax Legislative Counsel Joseph H. Guttentag International Tax Counsel Judith Dunn Deputy Tax Legislative

Counsel for Regulatory Affairs Norman B. Richter Deputy International

Tax Counsel J. Mark Iwry Deputy Benefits Tax Counsel Michael D. Thomson Attorney Adviser, Office of Tax

Legislative Counsel

TEI Delegation

Linda B. Burke(*) TEI President

Aluminum Company of America Jack R. Skinner(*)

TEI Senior Vice President

Halliburton Company James R. Murray(*)

TEI Secretary

PacifiCorp Sandy J. Navin(*) TEI Treasurer

General Mills, Inc. Kathy M. Blankey(*)

Bell Atlantic NSI Lester D. Ezrati(*) Hewlett-Packard Co. Alan Getz(*) Mitsui & Co. (USA). Inc. James Hutchison(*)

Bramalea Ltd. Charles W. Shewbridge, III(*) BellSouth Corporation Robert D. Adams Chair, TEI IRS

Administrative Affairs Committee

Halliburton Company Philip J. Bergquist,

Chair, TEI International

Tax Committee

Apple Computer Inc. Michael A. DeLuca

Chair,TEI Federal Tax Committee

Household International, Inc. Michael J. Murphy

TEI Executive Director Timothy J. McCormally TEI General Counsel and

Director of Tax Affairs Mary L. Fahey

TEI Assistant Tax Counsel Jeffery P. Rasmussen TEI Assistant Tax Counsel (*) Members of TEI Executive Committee

(1) The six issues are: (1) the burgeoning irrelevancy of legal ownership; (2) the differentiation of capital (or principal) from the income on that capital; (3) the distinction between debt and equity; (4) the treatment of limited liability companies and other emerging business structures; (5) the differing tax treatment of financial intermediaries. and (6) the characterization of technological developments (such as customized software). (2) TEI filed comments on three specific funding proposals: the reduction in the amount of interest to be paid on corporate tax refunds the modification of the substantial understatement penalty; and the amendment of the longstanding export-source rule. (3) The seven treaties and protocols are: Canada, France, Kazakhstan, Mexico, Portugal, Sweden, and Ukraine. (1) The six issue are: (1) the burgeoning irrelevancy of legal ownership; (2) the differentiation of capital (or principal) from the income on that capital; (3) the distinction between debt and equity; (4) the treatment of limited liability companies and other emerging business structures; (5) the differing tax treatment of financial intermediaries; and (6) the characterization of technological developments (such as customized software). (2) 4EI filed comments on three specific funding proposals: the reduction in the amount of interest to be paid on corporate tax refunds; the modification of the substantial understatement penalty, and the amendment of the longstanding export-source rule. (3) The seven treaties and protocols are: Canada, France, Kazakhstan, Mexico, Portugal, Sweden, and Ukraine.