Welcome letters to new IRS Commissioner and Assistant Treasury Secretary.

On May 11, 1993, the United States Senate confirmed President Clinton's nomination of Margaret M. Richardson to serve as Commissioner of Internal Revenue. Before her appointment by the President, Commissioner Richardson was a partner in the Washington office of Sutherland, Asbill & Brennan, and previously worked in the IRS Office of Chief Counsel.

On May 17, the Senate confirmed the President's nomination of Leslie Samuels to serve as Assistant Secretary of Treasury for Tax Policy. Before his appointment, Assistant Secretary Samuels was a partner in the New York office of Cleary, Gottlieb, Steen & Hamilton.

Reprinted below are the welcoming letters that TEl President Bob Periman sent to Commisioner Richardson and Assistant Secretary Samuels.

Letter to Commissioner Richardson

On behalf of Tax Executives Institute, congratulations on your recent appointment to be Commissioner of Internal Revenue. As the premier organization of corporate tax executives and one of the IRS's principal stakeholders, TEl stands ready to assist you in improving tax administration.

The Institute has long enjoyed an excellent working relationship with the Internal Revenue Service. Through correspondence and written comments, public hearings and smaller, informal meetings, and formal liaison sessions-- as well as through cross-participation in each other's educational programs--TEl and the IRS have done more than keep the lines of communication open: we have demonstrated that progress toward common goals is possible when the participants approach issues with candor, thoughtfulness, and professionalism. Although we may not always agree, TEl has no reservation in saying that a successful partnership has been forged between the tax administrator and the taxpayer. We believe that the IRS has been ably led by Mike Dolan during the interregnum between Commissioners, and look forward to continuing our joint efforts with you at the helm to make the tax law administrable and consistent with sound tax policy.

As you know, TEl is a strong supporter of the IRS's total quality management efforts. We are especially pleased that our comments have been solicited concerning changes in the Coordinated Examination Program, and look forward to continuing improvement not only in the CEP program but in the general program as well. The IRS's reaching out to taxpayers in a whole range of areas--from advance pricing agreements and accelerated issue resolution to taxpayer involvement in the examination planning process-- is a very positive development.

In our view one of the best innovations in the last few years was the development of the IRS/Treasury business plan. We believe the business plan produced its intended effect of focusing attention on the big projects and allowing the Commissioner and Assistant Secretary (and their organizations) to establish priorities and drive the agenda, rather than the other way around. Consequently, we recommend that the concept of the business plan be retained.

I want also to take this opportunity to highlight three issues that TEI believes merit top-level attention. First, the Institute urges you (and your new Chief Counsel once he or she is appointed) to take a personal interest in the need for guidance on the longterm effect of the Supreme Court's decision in Indopco. We believe broadbased guidance is necessary because-- notwithstanding the National Office's assurances that the Court's decision "really didn't change anything"--field agents continue to invoke the decision as an amulet to disallow deductions for expenses long treated as currently deductible. Taxpayer concern is especially heightened in respect of environmental remediation expenses. We recognize that the IRS is reviewing this whole area and, indeed, we are in the process of preparing a detailed position paper on the subject, which we intend to submit near the end of the month.

Second, TEl wishes to reiterate its concerns about the potentially pernicious effect of Counsel involvement in the examination and Appeals processes. We believe one key is the very thing you emphasized before the Senate Finance Committee in your confirmation hearing: assuring that taxpayers' treatment as well as their perception of their treatment is fair and equitable.(1) We were heartened by your testimony, as we were heartened by then-Commissioner Peterson's December 1992 remarks that changes in how Counsel personnel are utilized should not operate "to deprive taxpayers of the traditional right, through formal technical advice or more informally, to present legal arguments to the person most directly responsible for deciding the Service's position."

We urge the IRS to formalize this policy, for as recently as this week TEl members have contacted us to report that they have been denied an opportunity to interact with the pertinent Counsel personnel. This seems in direct contravention of Commissioner Peterson's statement that "when the Exam team is relying on legal advice from Counsel concerning a matter of substantive tax law, the taxpayer in the ordinary course should have an opportunity to discuss the legal issue with the persons providing the advice, and the Exam team should facilitate and participate in those discussions." We hope that you and your new Chief Counsel will take action to ensure that the field's actions match the National Office's words.

Last but not least, TEI is very much concerned about the administrative burdens that would accompany the Administration's "service industry noncompliance initiative." TEl supports the IRS's efforts to target pockets of noncompliance and to take appropriate actions, but those "appropriate actions" should not place undue burdens on already compliant taxpayers. Hence, the Institute has testified before Congress on why requiring the filing of Forms 1099 on payments to corporate service providers is not as easy as "flipping a switch," and we have followed up on our testimony by suggesting a number of ways in which the compliance burdens can be tempered. We have shared these materials with John Devlin as well as with Jim Fields at the Treasury Department, and would be pleased to provide an additional copy to you. Incidentally, we are very pleased that John Devlin has made arrangements to meet with taxpayers (including Intel) about the systems and other challenges presented by the information reporting proposal.

Once again, congratulations on becoming Commissioner of Internal Revenue. We look forward to a long and worthwhile working relationship. If you wish to discuss any of the issues discussed in this letter, or if we can be of any assistance to you, please do not hesitate to call either Mike Murphy or Timothy McCormally at TEI. Alternatively, I would be delighted to hear from you at [phone].

Letter to Assistant Secretary Samuels

On behalf of Tax Executives Institute, congratulations on your recent appointment to be Assistant Treasury Secretary for Tax Policy. As the premier organization of corporate tax executives and one of the Treasury's principal stakeholders, TEI stands ready to assist you in improving the tax system. I also wish to underscore the Institute's invitation to you to join us in Orlando for TEI's 48th Annual Conference on October 23-27. For your information, I enclose a copy of our letter of invitation, which was sent to your ofrice before your formal appointment.

The Institute has long enjoyed an excellent working relationship with the Office of Tax Policy, as well as your counterparts at the Internal Revenue Service. Through correspondence and written comments, public heatings and smaller, informal meetings, and "official" liaison sessions--as well as through Treasury's participation in TEI's educational programs--TEI and the Treasury have kept the lines of communication open and demonstrated that progress is possible when both sides approach issues with candor, thoughtfulness, and professionalism. Although we may not always agree, TEI has no reservation in saying that a successful partnership has been forged between the corporate tax community and the Office of Tax Policy. We are confident that partnership will continue with you at the helm.

TEI is a strong supporter of total quality management efforts in both the public and private sectors, and we applaud the goals behind President Clinton's "reinventing government" initiatives. In our view, one of the best innovations in the last few years has been the development of the Treasury/IRS business plan. We believe the business plan produced its intended effects of focusing attention on the big projects and allowing the Assistant Secretary and Commissioner (and their organizations) to establish priorities and drive the agenda, rather than the other way around. The business plan builds accountability into the system, and consequently, we recommend that the concept of the plan be retained.

As you know, TEI has testified before Congress on the President's tax proposals, and has provided copies of our testimony and follow-up statements to your office. As you might anticipate based on our testimony, we intend to press for changes in the proposals in order to advance the goals of simplification, administrability, and competitiveness. Although the Institute's interest in the bill goes to a wide variety of provisions (ranging from the proposed disallowance of a deduction for lobbying expenditures to the changes in the section 482 penalty to the deferral proposal), I want to take this opportunity to comment on a "relatively modest" compliance proposal, the administrative implications of which have to date been given precious little attention by the Administration, the tax-writing committees, arid many of our colleagues in the tax community.

Specifically, I refer to the President's "service industry noncompliance initiative" (SINC). TEI supports the Administration's efforts to target pockets of noncompliance and to take appropriate actions. But those actions can scarcely be "appropriate" where they place undue burdens on already compliant taxpayers. Upon analysis, we believe the Administration's SINC proposal would do just that, and without providing the IRS with an effective compliance tool. TEI's testimony before the Ways and Means Committee discussed why requiting the filing of Forms 1099 on payments to corporate service providers is not as easy as "flipping a switch," and we have followed up on our testimony by suggesting a number of ways in which the compliance burdens can be tempered. We have shared these materials with Jim Fields during his service as acting Assistant Secretary, and with John Devlin and other IRS officials.

Although the Ways and Means Committee report states that IRS "may continue to exempt from information reporting certain types of payments and certain types of corporate payees where the risk of noncompliance is minimal," we support the indusion of more specific instructions in either the statute or the committee report. For example, in recognition of the high level of compliance already present among certain classes of corporations, consideration should be given to exempting from reporting payments made to corporations that (i) are subject SEC reporting requirements (and have independent, certified financial statements), (ii) are part of the Coordinated Examination Program (and are therefore subject to continual audit by the IRS), or (iii) have gross receipts above a specified level (say, $15 million as reported on Form 1120). Similarly, information returns should not be required in respect of intercompany payments. In addition, where payments are made for both services and nonservices, payers should be given the option of reporting the aggregate amount, at least where services are not billed separately. Finally, we believe that payers should be permitted to report payments to a single payee on multiple information returns. Absent reasonable and meaningful restraints on the scope of SINC, the proposal threatens to become the Clinton Administration's section 89; that is something nobody wants.

Finally, I want to mention one administrative matter that TEI believes deserves your personal attention. We urge you, working with Commissioner Richardson and the still-to-be-named Chief Counsel, to address the need for guidance on the long-term effect of the Supreme Court's decision in Indopco. Although the interpretation of a judicial decision might not ordinarily command the Assistant Secretary's attention, we believe Indopco should. (As you know, so should Arkansas Best, but that is an issue for another letter.) TEI believes broad-based, coordinated guidance on Indopco is necessary because--notwithstanding the IRS National Office assurances that the Court's decision "really didn't change anything"'---field agents continue to invoke the decision as an amulet to disallow deductions for expenses long treated as currently deductible. Taxpayer concern is especially heightened in respect of environmental remediation expenses, where proper tax policy clearly implicates non-tax issues such as the Administration's environmental policies. We recognize that this whole area is under review, and urge you to insert yourself into the process at the appropriate place. In this regard, the Institute is in the process of preparing a detailed position paper on the subject, which we intend to submit to Commissioner Richardson and you near the end of the month.

Once again, congratulations on becoming Assistant Secretary for Tax Policy. We look forward to a long and worthwhile working relationship. If you wish to discuss any of the issues discussed in this letter, or if we can be of any assistance to you, please do not hesitate to call either Mike Murphy or Timothy McCormally at TEI. Alternatively, I would be delighted to hear from you at [phone].