The role of the AICPA in the development of tax policy.

What is the "proper" tax treatment for capital gains? How could the social security retirement system be improved? Does the double tax on corporate earnings reduce the incentive for equity investment in U.S corporations? These questions and others like them are often asked of members of the accounting profession. As the representative of the profession, the AICPA is viewed by many as a valuable adviser in the design and reform of the tax system.

To better serve in this role, the Institute, through its Tax Division, has an established program for the development of Statements of Tax Policy (STPs). STPs are major statements of the AICPA on broad tax policy issues. These statements present the Institute's position on tax matters of general interest in a series of well-researched, clearly written documents. The development of STPs is the responsibility of the Tax Policy and Planning Committee working under the direction of the Tax Executive Committee. The Tax Executive Committee has the authority to speak for the AICPA on tax matters.

Because of their importance, the Tax Division has established elaborate procedures for STPs to assure quality and to protect minority viewpoints. On average, a statement will take two to three years to be researched, written, released as an exposure draft, revised and approved. Because of the lengthy development period, the Tax Division must anticipate the areas of the tax law that will receive scrutiny, or identify areas in need of significant reform, and begin work well before the issue comes to the forefront of public debate.

A recent example of this is the release of Statement of Tax policy 10, Integration of the Corporate and Shareholder Tax System (see The Tax Adviser, Feb. 1993, at 129). Double taxation of corporate earnings has been an issue for a long time. In fact, STP 10 replaced STP 3, originally issued in 1976.

However, new attention has been focused on corporate integration with the release in December 1992 of the Treasury Department paper, Restructuring the U.S. Tax System for the 21st Century, and the January 1994 creation of a Presidential Commission on Entitlement Reform. In addition to examining long-term budget savings from entitlement reform, the commission is charged with investigating the feasibility of moving to an alternative tax system. STP 10 took over two years to complete, but was finalized in plenty of time to allow the Institute to participate in the current debate.

Once a policy position has been adopted, the Tax Division seeks every opportunity to make its views known to the members of the congressional tax writing committees, the members of the executive branch of government and the general public.

During the past 20 years, the Tax Division has issued the following Statements of Tax Policy: 1. Taxation of Capital Gains (1974). 2. Value-Added Tax (1975). 3. Elimination of the Double Tax on Dividends (1976, replaced by STP 10). 4. Estate and Gift Tax Reform (1976) suspended). 5. Taxation of the Formation and Combination of Business Enterprises (1979) 6. Indexation of the Tax Laws for Inflation (1980). 7. Analysis of Capital Cost Recovery Proposals (1980). 8. Suggested Improvements for the Social Security Retirement System (1980, revised 1987). 9. Implementing Indexation of the Tax Laws (198). 10. Integration of the Corporate and Shareholder Tax systems (1993) (AICPA Product # 058210).

The Tax Policy and Planning Committee periodically reviews and, if necessary, suspends or revises outstanding tax policy statements. As previously mentioned, STP 10 was a revision of and expansion on STP 3. STP 4, Estate and Gift Tax Reform, was suspended when many of the reform proposals it contained were enacted into the Tax Reform Act of 1976. STP 8, Suggested Improvements for the Social Security Retirement System, was revised in 1987 in order to participate in the then-current debate about fund surpluses.

Currently, two STP projects are underway. First, the Capital Gains Taxation Task Force is reconsidering STP 1, Taxation of Capital Gains (and the portions of STP 6 and 9 dealing with indexation of capital assets), with a view towards updating it, challenging its conclusions and establishing a current policy position for the AICPA. In the years since the release of STP 1, the tax rate structure has changed dramatically and the tax differential on capital gains has been somewhat reduced. It is an area that will continue to receive considerable attention.

Second, the Consumption Taxation Task Force is revising and expanding STP 2, Value-Added Tax, to offer a more comprehensive view of consumption taxes and to examine alternatives suggested for the United States. Recent trends in tax legislation demonstrate a growing need for revenue increases, an alternative tax system or perhaps new revenue sources. This makes taxes such as a valued added tax, a national sales tax, a consumed income tax, or a similar consumption tax, much more a current issue for discussion than might have been considered possible a few years ago.

The Tax Policy and Planning Committee is also considering other areas for study and possible policy statements, including comprehensive reform of the tax system and reform for the tax legislative process.

In developing Statements of Tax Policy, the Tax Division does not limit itself to just putting forth the Institute's position on broad tax matters; the Tax Division also attempts to add to the debate and to educate the reader. The next few years will offer many new challenges and the Tax Division is preparing now to meet those challenges.