U.S.-Canada treaty.

On May 12 and May21,1992, Tax Executives Institute wrote policymakers in both the U.S. Department of the Treasury and the Canadian Department of Finance concerning the pending protocol to the United States-Canada Tax Convention. On May 12, the Institute wrote U.S. Secretary of the Treasury Nicholas F Brady, urging the United States to work for the early conclusion of negotiations for the protocol. On May 21, TEI sent virtually identical letters to Canadian Minister of Finance Don Mazankowski and U.S. Assistant Treasury Secretary Fred T Goldberg, Jr., recommending that the negotiators give consideration to including an arbitration provision in the protocol. The text of the letters to Secretary Brady and Assistant Secretary Goldberg follow. (Copies of the letter to Minister of Finance Mazankowski may be obtained by sending a written request to TEI Headquarters.) The letters were prepared under the aegis of the Institute's International Tax Committee, whose chair is Raymond G. Rossi of Intel Corporation, and its Canadian Income Tax Committee, whose chair is Hugh D. Benvick of Alcan Aluminium Limited.

Letter to Secretary of the Treasury Brady

Recent press reports indicate that Philip D. Morrison, the Treasury Department's International Tax Counsel, will resign his position at the end of the month. As the principal association of corporate tax executives, Tax Executives Institute has had many occasions to work with Phil during his tenure as International Tax Counsel, and we know first hand of his contributions to advancing the Administration's tax policy agenda. He is to be commended for his commitment to public service.

One of the areas in which Phil has played a vital role is in the negotiation of bilateral tax treaties between the United States and its trading partners. Given the high level of trade between the United States and Canada, perhaps no treaty is more important than the U.S.-Canada Tax Convention. TEI has a special interest in this treaty since 10 percent of our 4,800 members work for Canadian companies, and a substantial number of our U.S.-based members work for companies having substantial sales and activities in Canada. For the past several years, U.S. and Canadian negotiators (including Phil) have been working on a protocol to the current tax treaty. These negotiations are of vital importance to the U.S. and Canadian businesses represented by TEI, and we believe the protocol is essential to realizing the full potential of the historic Free Trade Agreement. We understand that much progress has been made in resolving the major issues between the parties, and are confident that a final agreement is within reach.

Tax Executives Institute respectfully urges that the Treasury Department seize the opportunity posed by Phil Morrison's impending departure to accelerate the pace of negotiations. Obviously, the Administration cannot and should not act precipitously. We believe, however, that the mutual interests of the U.S. and Canadian governments, as well as a multitude of affected businesses, would be served by the early initialing of the protocol. To minimize the risk of the negotiations' being effectively suspended upon Phil's departure, we ask that the Treasury Department redouble its efforts to conclude the protocol at the negotiating session scheduled later this month. Please be assured that TEI stands at the ready to work with both governments to achieve real progress in this important area.

Letter to Assistant Treasury Secretary Goldberg

TEI recently wrote to Treasury Secretary Nicholas F. Brady, requesting that the Secretary consider expeditiously concluding the protocol to the U.S.-Canada Income Tax Convention. Tax Executives Institute has a special interest in this treaty since 10 percent of our 4,800 members work for Canadian companies, and a substantial number of our U.S.-based members work for companies having substantial sales and operations in Canada. These negotiations are of vital importance to the U.S. and Canadian businesses that employ the members of TEI, and we believe the protocol is essential given the high level of trade between the United States and Canada.

Notwithstanding our desire for swift resolution of outstanding issues and conclusion of a successful protocol, TEI urges the negotiators to consider including an arbitration provision in the treaty. Based upon a review of recently issued proposed regulations under section 482 of the U.S. Internal Revenue Code (governing transfer pricing), the Institute is concerned that the proposed rules may not fully comport with United States Treaty partners' understanding of the internationally accepted arm's-length standard. As a result, there may be a substantial increase in the number of cases put to the Competent Authority of the United States in respect of trading transactions with Canada. More important, there may be circumstances in which the Competent Authorities of the United States and Canada will not be able to agree, to the detriment and double taxation of the taxpayers involved.

As you will appreciate, taxpayers need certainty of resolution of competent authority proceedings. We believe that providing a means of arbitration of such cases is one way to furnish the desired certainty. TEI requests that you include in the protocol to the U.S.-Canada Tax Convention an "arbitration" clause based on the European Economic Community (EEC) model (the Convention on the Elimination of Double Taxation in Connection with the Adjustment of Profits of Associated Enterprises, as agreed upon by the members of the EEC on July 23, 1990 -- hereinafter referred to as the EEC Convention).

Precedent exists for inclusion of an arbitration clause in U.S. tax treaties. As you know, Article 25 of the U.S.-Germany Tax Convention (and the related letter of understanding between the two countries) sets forth an arbitration procedure for resolution of competent authority proceedings. While Article 25 of that Treaty represents one approach to arbitration, TEI believes that a more complete model of arbitration language to incorporate in the U.S.-Canada Tax Convention may be found in the EEC Convention. The EEC Convention is designed to promote full and final resolution of transfer pricing issues in the context of an integrated economic community of nations.

In a fashion similar to the EEC trade zone, the U.S.-Canada Free Trade Agreement is desinged to promote economic integration between the United States and Canada. TEI believes that the historically close economic ties between the United States and Canada and the purposes of the Free Trade Agreement would be fostered if taxpayers on both sides of the border know that transfer price disputes will be fully and finally resolved without double taxation. Thus, TEI recommends that the EEC Convention language on arbitration be incorporated in the U.S.-Canada Tax Convention protocol.

For your information, TEI is sending a similar letter to The Honourable Donald Mazankowski, Canadian Minister of Finance. We stand ready to assist both governments to achieve real progress in this important area.

CPE/CLE Accreditation

Tax Executives Institute has historically endeavored to provide its members with excellent educational programs. In light of the minimum requirements for continuing professional education that state CPA and bar associations now impose, the design and conduct of TEI's conferences, seminars, and courses become even more important.

To assist TEI members in satisfying their CPE requirements, TEI has contacted accrediting agencies in all 50 states and the District of Columbia to request information about approval for sponsorship of continuing professional education programs. In addition, TEI has become a qualified sponsor of CPE programs in respect of IRS enrolled agents.

Boards of Accountancy. TEI is currently registered with the following Boards of Accountancy: Illinois (#158-000651), Indiana (#CE92000119, Exp. 12/93), New Jersey (#160), New York (E90-253 (1/1/91-8/31/93)), Ohio (P0087), Pennsylvania (PX613L), and Texas (#3522). TEI is also registered with the National Association of State Boards of Accountancy (Sponsor No. 91-00116-92).

Continuing Legal Education. The Institute is registered in the following states as a sponsor of continuing legal education programs: California, Iowa, Kentucky (1991 46th Annual Conference -- 26.5 credit hours, 1 Ethics credit; 1992 42nd Midyear Conference -- 26.5 credit hours), Minnesota (1992 42nd Midyear Conference -- 18.5 credit hours; 1991 46th Annual Conference -- 17.75 credit hours), Missouri, Ohio (1992 42nd Midyear Conference -- 22.25 credit hours; 1991 46th Annual Conference -- 22.75 credit hours; International Tax Course -- 25.25 credit hours), Oklahoma (1991 46th Annual Conference -- 28.5 credit hours; 1992 42nd Midyear Conference -- 26.5 credit hours), South Carolina (1990 40th Midyear Conference -- 22.5 hours; 1991 46th Annual Conference -- 10.58 MCLE, hours, .92 Ethics), and Wisconsin (1991 41st Midyear Conference -- 26.5 credit hours; 1991 46th Annual Conference -- 26.0 credit hours)

Note. Several states, such as Wisconsin and Georgia, require the individual to submit conference materials directly to the CLE Board. TEI provides a continuing professional education form for each registrant at its conferences, courses, and seminars, which should be completed at the conclusion of the program and returned to the TEI Registration Desk for verification and signature. A copy of this form is retained and filed at TEI Headquarters.