Washington copes with Cicadas while TEI buzzes with technical activities: schedule M-3, U.S. tax legislation on FSC/ETI repeal, OECD permanent establishment rules, LMSB's IDR process changes, and Form 8858 keep TEI humming with activity.
Proposed Schedule M
For the past several months, a working group of TEI members has interacted with the Treasury Department and the IRS's Large and Mid-Size Business Division on the design of a new tax return schedule relating to book-tax differences and the government's desire to enhance "transparency." New Form Schedule M-3, Net Income (Loss) Reconciliation for Corporations with Total Assets of $10 Million or More, would expand the current Schedule M-1 and increase the transparency of corporate tax return filings. In comments filed with LMSB on June 7, TEI commended LMSB for its efforts to achieve currency in audits and focus on those issues of most concern to the government reducing taxpayer burden. Following on comments made during several meetings, however, the Institute cautioned that the design and implementation of proposed Schedule M-3 must take into account a number of issues before it is adopted. One of TEI's major recommendations is to delay the effective date of at least portions of the new schedule. TEI explained that deferring the implementation of the new form was necessary because taxpayers would otherwise have insufficient time to complete the necessary systems changes and, further, because current year data are already being processed in existing systems. TEI also provided specific member comments and questions on draft Schedule M-3, as well as the draft instructions.
TEI's efforts on Schedule M-3 were coordinated by Nell Traubenberg of Storage Technology Corporation, chair of TEI's Federal Tax Committee. The Institute's letter appears in this issue beginning on page 258.
Pending U.S. Legislation
On June 3, TEI followed up on earlier comments about pending tax legislation by submitting comments to members of the House Ways and Means Committee. Filed before Committee Chair Bill Thomas released the latest version of the House bill, the Institute's submission identified both provisions of S. 1637, the Jumpstart Our Business Strength (JOBS) Act, that should be enacted and provisions that should be eliminated as counterproductive and ill-advised.
TEI's June 3 letter is reprinted in this issue beginning at page 254. (The Institute's March 10, 2004, letter to the House and Senate tax-writing committees was reprinted in the March-April issue of The Tax Executive.)
Clarifying Permanent Establishment
On June 7, TEI sent a letter to the Organisation for Economic Cooperation and Development on the international body's permanent establishment rules. The comments responded to the request of the OECD's Working Party No. 1 on Tax Conventions and Related Questions for comments on proposed clarifications in the OECD's Commentary on aspects of the permanent establishment concept. The comments supplement TEI's October 2003 letter on the same issue. TEI endorsed the Working Party proposals to clarify that: (1) "[w]hen applying the permanent establishment definition, one must look at a specific enterprise and not at a group of entities as a whole," (2) management services provided to a non-resident entity on an arm's-length basis do not create a permanent establishment, and (3) mere participation in meetings for the negotiation of contracts is not enough, in itself, to conclude that the person has exercised an authority to conclude contracts in the name of a foreign enterprise.
TEI's October 2003 letter was reprinted in the November-December 2003 issue of The Tax Executive. The June 7 letter, praising the Working Party for seeking clarification of the PE definition and urging the OECD to move swiftly toward adoption of the recommendations, is reprinted in this issue, beginning at page 266.
IRS Currency Initiative
On May 7, TEI submitted comments to LMSB Commissioner Deborah Nolan regarding the latest phase of LMSB's currency initiative, including a proposal to mandate a 20-day IDR response time. This is the second phase of LMSB's productivity improvement effort, involving possible changes not only to the use of information document requests, but also to notices of proposed adjustments, revenue agent reports, and 30-day letters. While TEI has long and consistently supported the goal of audit currency, the Institute's letter articulated significant reservations about some of the proposed changes. After outlining specific concerns, TEI suggested that the IRS can advance its currency goal without rupturing its relationship with taxpayers through fostering an open, honest, and two-way relationship between the taxpayer and the audit team--not isolating one item like IDR response time to define cooperation. This approach is the most effective way of getting and staying current.
The Institute's May 7 letter is reprinted in this issue beginning at page 241.
Disregarded Entities--Form 8858
On May 6, TEI representatives met with IRS and Treasury officials to discuss the Institute's comments on the Form 8858, Information Return of U.S. Persons with regard to Foreign Disregarded Entities. TEI's delegation to the meeting included Jeffrey Lonsdale of Lamar Hunt Family Companies, John Shomaker of Universal Leaf Tobacco Company, and Fred Murray and Mary Lou Fahey of TEI's staff; several other members joined the meeting by conference call.
The meeting focused on the administrative burdens imposed by the new form, and although the IRS clearly intends to move forward, the agency seems flexible about the way in which the information is submitted. Thus, the use of existing organizational charts and attachments in PDF format may be permitted. The IRS also seems open to combining some questions on the first page of the form (such as the name and address of the tax owner) with the organizational charts. There was also some discussion about permitting taxpayers to file the form based on local books and currency.
The Institute's March 2, 2004, comments on Form 8858 were reprinted in the March-April issue of The Tax Executive.
TEI continues to meet with the IRS concerning the need for record retention agreements for machine-sensible files under Rev. Proc. 98-25. The Institute's April 8 comments on an LMSB proposal are reprinted in this issue, beginning at page 256. The letter follows up on a March 3 meeting with LMSB during which the proposal was first discussed. Paul O'Connor of Millipore Corporation, chair of TEI's IRS Administrative Affairs Committee; Nell Traubenberg of Storage Technology Corporation, chair of TEI's Federal Tax Committee; Paul Marcy of Sara Lee Corporation; and Fred Murray and Mary Lou Fahey of the Institute's staff represented the Institute at the meeting; Richard Olson of Secure Computing Corporation, chair of TEI's Advanced Technology Committee, joined the meeting by telephone. A follow-up call on the issue was held on June 2.
Minutes of Liaison Meetings
On February 3, 2004, a delegation from TEI, led by President Ray Rossi, met with representatives of the United States Treasury Department Office of Tax Policy, including Assistant Secretary for Tax Policy Pamela Olsen. The agenda for the meeting is reprinted in the March-April issue of The Tax Executive. The minutes of the liaison meeting are reprinted in this issue, beginning at page 249.
The minutes of TEI's February 3 liaison meeting with Commissioner Deborah Nolan, Division Counsel Cynthia Mattson, and other representatives of the IRS Large and Mid-Size Business Division are also reprinted in the issue, beginning at page 244. (The agenda for the meeting is reprinted in the March-April issue of The Tax Executive).
Editor's Note: The March-April 2004 issue of the Tax Executive contained a printing error. Pages 110 and 111 of Sandra Slaats' article, "Revised Canadian Proposals Affecting Foreign Affiliates" were transposed. We apologize to Ms. Slaats and our readers for any confusion.
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|Title Annotation:||Recent Activities|
|Date:||May 1, 2004|
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