A message from the president.
Reminiscing is something that often comes with the time of year. June graduations and commencements are typically a time to look both forward and backward, and the 60th anniversary of D-Day and the death of Ronald Reagan this summer inspired a rush of memories across the nation and around the world. Preparing an annual report of the Institute's activities and accomplishments during the last year also prompts a look backward--and then to the future.
TEI was founded six decades ago, a little more than two months after the Allies' landing on Omaha Beach. The vision of TEI's founders--to create an environment within which in-house tax professionals can network, educate, and collaborate with their confreres--has only grown more vital with the passage of time. Thus, 42 years after the Institute's founding, I joined the Institute's Santa Clara Valley Chapter, and immediately learned of TEI's efforts on the Tax Reform Act of 1986, which was wending its way through Congress. Following the enactment of the legislation, I became active in the International Tax Committee's project to prepare pre-regulation comments on the bill's myriad and monumental international tax provisions. The collaborative nature of the process spurred me to remain active in TEI's advocacy activities.
Of course, many problems that the Institute addressed in 1986 still haunt tax executives, and while some progress has been made to "reform the reforms" in the ensuing 18 years, much remains to be done. Indeed, many of the provisions in pending FSC/ETI legislation (or advanced in the TEI's submissions on the bill) are the outgrowth of work begun in 1986, first to identify potential problems with the legislation and then to temper and ameliorate their harsh effects.
Communication and Member Service as TEI's Overarching Goals
It is not just the tax reform efforts of nearly two decades ago that, like a madeleine, unleash memories as I look back on my year as TEI President. It is also the legacy of tax reform's most important political champion--President Reagan--as the Great Communicator. Effective communication is the key to success in any field, and that is why effective communication was one of the Institute's two overarching goals this past year. Specifically, TEI undertook to promote our advocacy, networking, and educational accomplishments more effectively and to strengthen our unwavering commitment to high professional standards. Our other goal was to significantly improve member service--to equip TEI's members with the information and tools they need to be effective and to promote good tax policy and administration.
To advance the twin themes of communication and member service, TEI established three working groups to bring focus to its activities. I am gratified by the work of each of the groups.
The principal focus of the Engaging Members Working Group was enticing more members to become involved in the Institute's far-flung activities. Led by Bob McDonough of the New England Chapter, the group aimed its efforts at expanding and enhancing the diversity of the Institute's membership in all respects. Specific activities of the Engaging Members Working Group included the following:
* Solidifying the link between TEI and its members, and between the chapters and the regions. While we can always do more, we made clear progress on this objective, for example, by sending monthly "blast emails" to the membership and periodic advocacy alerts to chapter leaders.
* Expanding the membership, especially in Asia and other under-served areas. Five years ago, TEI reached beyond North America by chartering a chapter in Europe. With membership in the European Chapter now approaching the 200 member mark, the Institute has turned its attention to Asia, where an energetic group of members and potential members have been meeting informally and will likely move toward requesting a charter within the next year. (In Asia, much more than Europe, the geographical distance between tax professionals in, say, Hong Kong, Singapore, Sidney, and Jakarta can be a challenge, but with e-mail and other tools, the group is dedicated to building a strong, interactive network.) A fledgling group is also at work in respect of Latin America. Building upon on our success throughout the United States, Canada, and Europe, it is quite possible that, within a few years, we will have additional chapters spanning the globe.
* Holding a conference targeted at the needs and special interests of senior tax executives. This high-level, high-quality program--held in Scottsdale in May-was both an experiment and an unqualified success. Not only was the program oversubscribed, but the evaluations were uniformly positive, both in terms of the technical content presented during the plenary and concurrent sessions and in terms of the networking opportunities afforded the registrants, many of whom had not previously attended many Institute programs. The "good reviews" of the senior tax executive conference have prompted the Continuing Education Committee to schedule "STE-II" for May 2005.
* Aiding members in transition. While current economic trends are promising, one consequence of the recent downturn was an increase in the number of unemployed or underemployed members. The growth in the market for tax professionals has been stubbornly slow. To address the situation, TEI extended the period during which unemployed members remain eligible to participate in Institute programs and implemented a new fee schedule to permit members in transition to attend Institute conferences at a significant discount. In addition, many chapters voted to waive or reduce fees for unemployed members.
Our second working group, ably chaired by Bill Sample of the Seattle Chapter, was dedicated to expanding the scope and effectiveness of TEI's advocacy and networking activities, as well as to drawing more members into our advocacy efforts. An important step in this process was the development of a "How To" advocacy guide, which explained just how easy it is to become involved in the Institute's committee activities-how easy it is, in the group's term, to "make your issue TEI's issue." The How To guide, which was distributed to all members last fall and was the topic of a special session at the 2004 Midyear Conference, is prominently posted on the website and will periodically be updated to keep it fresh. The working group also worked on how the Institute could do a better job of sharing its advocacy successes with the membership and the public at large.
While the Empowering Members Working Group was focused on process issues--as well as whether TEI's current policies might be productively revised--the Institute's committees continued their outstanding work on particular projects, which are discussed below.
Enhancing Membership Value
The third working group--devoted to enhancing membership value--had an incredibly broad scope. For example, the working group was charged with advancing the development of TEI's new website, which was successfully launched on August 30. The new site integrates TEI's previous public and members-only site with "satellite" sites for each of our chapter, and provide workspaces for committees, industry groups, and ad hoc groups formed by individual members. I'm delighted to announce that in its first 24 hours the site attracted more than a thousand visitors, and traffic continues to be strong. The launch of the site, of course, was not the end of the process, but I am confident that the new website will enhance TEI's ability to keep members up to date.
The Enhancing Member Working Group also worked closely with TEI's Corporate Tax Management Committee in developing a tax department survey, which will provide valuable benchmarking data for all tax executives. Like the new website, the corporate tax department survey found its audience--more than half of those surveyed returned the questionnaires, a remarkable response rate. The findings of the survey will be announced at the 2004 Annual Conference.
Several initiatives of the working group related to TEI's educational efforts--fine-tuning our industry sessions, expanding our distance-learning programs, and doing more at our conferences to make new members feel welcome. My thanks to Vince Alicandri of the Toronto Chapter, who chaired the group, and his colleagues for all their efforts.
TEI's Advocacy Accomplishments
TEI's advocacy efforts continue on a wide range of issues that demonstrate the depth and experience of our members, and the Institute's ongoing commitment to assisting governmental authorities in advancing collaborative tax administration.
Most prominent among these efforts may be TEI's involvement in a project to bring greater "transparency" to the Form 1120. Specifically, the Institute responded to an IRS and Treasury Department invitation to participate in the development of the new Schedule M-3, Net Income (Loss) Reconciliation for Corporations with Total Assets of $10 Million or More. A working group of TEI members met several times with LMSB and Treasury representatives to design a schedule that would enhance transparency without unduly burdening taxpayers. We share the government's hope that the new schedule will focus (or even eliminate) examinations, reduce the time required to produce information during audit, and eventually eliminate the need to file Form 8886 for many book-tax differences. One specific recommendation we made to Treasury and LMSB was to delay the effective date of at least portions of the new schedule. Many taxpayers would have preferred the elimination of Column A of Parts II and III (rather than the one-year delayed effective date). Nevertheless, TEI commends the government for making the filing of the information optional for the first year to give taxpayers additional time in which to modify and redesign the necessary data systems.
In summary, while TEI did not ask for the Schedule M-3, we are delighted with the collaborative approach the Treasury and IRS took to developing and refining the form.
TEI has remained active in helping the Large and Mid-Size Business Division fine-tune audit and tax compliance processes. For example, several Institute representatives participated in meetings on LMSB's new "breakthrough" initiative to achieve currency. Proposals to accelerate the audit process were rolled out during the Midyear Conference--itself a tribute the Institute's important role in tax administration. Further evidence can be found in the IRS's modification of some of the proposals--including a plan to require taxpayers to respond to information document requests within 20 days--were substantially modified (or shelved in their entirety) following TEI's raising significant concerns.
Finally, several TEI members and staff "starred" in two different IRS training videos--one on the joint audit planning process and the second on the effect of the Sarbanes-Oxley Act on tax administration. The joint audit planning process deserves special mention. The result of two years of work by a TEI-LMSB working group, the new process was announced in October 2004 and rolled out with a video featuring TEI's own Bob McDonough of the New England Chapter, Chris Riley of the St. Louis Chapter, and Executive Director Timothy McCormally. The video was distributed to TEI's chapters as well as LMSB offices throughout the
United States. (The Sarbanes-Oxley program included a lively panel discussion featuring members John Mann, Nanci Palmintere, Neil Traubenberg, and Roger Wheeler, as well as a separate segment with Timothy McCormally.)
TEI remained active in Canada, at both the federal and provincial level. For example, the Montreal and Toronto Chapters filed comments on the Quebec capital tax and the Ontario rollback of corporate income taxes, and Vice President for Canadian Affairs Mario Tombari testified before the House of Commons Standing Committee on Finance on pre-budget discussions. In addition, the Institute filed its first amicus brief in a Canadian tax case.
International projects in 2003-2004 included December comments on the section 482 services regulations. I was pleased to represent the Institute at a hearing on the proposed regulations in January; we also provided follow-up comments in June on the development of a per se list of low-margin services that could be charged at cost. The response to TEI's suggestions from government officials has been favorable.
Special mention should be made of TEI's comments on the definition of permanent establishment under the OECD model tax treaty. Spearheaded by TEI's European Chapter, with contributions from both our Canadian and U.S. members, the comments pressed for clarification of issues flowing from a decision by the Italian Supreme Court in a case involving Philip Morris. The OECD responded favorably to TEI's recommendations, issuing proposed clarifications of the model treaty's Commentary in April. The European Chapter was also involved in preparing submissions on VAT registration procedures in the 11 new European Union countries and on the convergence of IAS 12, Deferred Tax Accounting for Intercompany Profits on Inventory, with FAS 109, Accounting for Income Tax.
Mention should also be made of TEI's ongoing efforts in respect of the pending tax bill. The FSC/ETI repeal tax bill is critically important to many companies whose staffs belong to the Institute. While the diversity of our membership constrained our ability to become involved in some aspects of the legislation, the Institute weighed in repeatedly on the legislation. Attracting our attention (and opposition) were several administrative provisions--including those requiring the CEO to sign the tax return (or an attestation related to tax-return preparation), codifying the economic substance doctrine, increasing tax penalties, or establishing a tax "whistleblowing" regime--that would impose significant administrative burdens and disrupt business operations without any compensating improvement in tax compliance or collections.
We also challenged the Multistate Tax Commission on its so-called tax sheltering study, and filed comments on legislative proposals in Virginia and proposed administrative changes in Pennsylvania's taxation of deferred compensation. Finally, our Ottawa and Washington liaison meetings continued their tradition of candor and effectiveness, by providing members with the opportunity to raise real-world issues in a timely, constructive manner.
One final note on the need to persevere: In July the IRS and Treasury Department withdrew their 1991 proposed regulations and issued new ones on the allocation of charitable contributions under section 861 of the Internal Revenue Code. The new regulations adopted TEI suggestions made in comments filed over a 15-year period. It was one of the projects I worked on when I was a member of the International Tax Committee many years ago.
TEI's Educational Accomplishments
Year after year, tax executives report that education and networking, both locally and at the Institute level, are the primary reasons for belonging to TEI. While the Institute's advocacy efforts are important, the Institute especially shines in providing top-notch technical programs and networking opportunities to in-house tax professionals. This year's programs demonstrate the depth and breadth of those offerings.
In addition to its first STE conference, the Institute held programs on mergers and acquisitions, emerging international issues, and IRS audits and appeals, as well as four week-long tax courses on federal (introductory and advanced), international, and state and local tax issues. To see the Institute's breadth, one need only review at the attendance list for our introductory Federal Tax Course: In addition to a full complement of participants from across the United States, the week-long program in East Lansing, Michigan, attracted participants from Canada, Mexico, Ireland, the United Kingdom, Belgium, and Australia. The registrants demonstrate the truly global nature of TEI's membership.
To provide more choices for members, TEI continued its three tracks of concurrent sessions at both the Annual and Midyear Conferences. At the Midyear, we again offered LMSB "bonus" sessions on Wednesday afternoon and added several small workshops on Monday afternoon on Canadian, state and local, and corporate tax management issues. The CTM workshops were overwhelmingly successful (and oversubscribed), and may well become a mainstay of future conferences.
The key to high-quality educational programs is high-quality speakers, and in this arena, the Institute excelled. From practitioners who are at the top of their game to government officials who are at the top of the decision-making pyramid, TEI was pleased and gratified to attract the best in tax policy, planning, and administration. Some of our government speakers deserve special mention, including U.S. Deputy Secretary of the Treasury Samuel Bodman, who made his tax policy debut at the Midyear Conference; House Ways and Means Committee Chairman Bill Thomas, who gave a spirited and sometimes pointed defense of the benefits of the international tax reform; Assistant Treasury Secretary Pamela Olson; IRS Commissioner Mark Everson; and LMSB Commissioner Deborah Nolan.
TEI also explored new ways to make the educational experience meaningful and even fun for our members. During the Annual Conference in Atlanta, we used a high-tech audience response system to poll members on compliance with the Sarbanes-Oxley Act's internal control requirements. And a similar polling feature was a popular feature of TEI's first web conference on tax shelter disclosures, which was held in July. All in all, more than 5,000 people took advantage of TEI's educational opportunities (many by participating in our increasingly popular telephone conferences on topics ranging from the capitalization regulations to section 355 issues to the section 482 services regulations). It's a record of which all of us should be proud.
TEI's national programs may only be outshone by the programs of its chapters and regions. Consider these examples:
* The New York Chapter again teamed up with LMSB to sponsor the Third Annual Financial Services Conference.
* The Santa Clara Valley Chapter cosponsored the High Tech Tax Conference with San Jose State University.
* The Minnesota Chapter held its 21st Annual President's Seminar, which attracted more than 300 members and guests.
* Our three upstate New York Chapters held their annual Tri-Chapter Conference in Rochester.
These four programs are just examples of the more than 600 local meetings held each year. Whether it is the European Chapter's February program in Zurich, the Pittsburgh Chapter's joint meeting in March (which featured IRS Commissioner Everson), Region V and VI's liaison meeting with LMSB, the Houston Chapter's fabled tax school, or Region VII's VIII's respective conferences in Kiawah Island and Santa Barbara, the quality of the educational sessions and the consistency of their networking value are undeniable.
TEI remains in strong financial condition. Reprinted for your information are the consolidated audited financial statements of TEI and TEI Education Fund (a related section 501(c)(3) organization), for the fiscal year ended on June 30, 2004. (The Institute's financial statements were presented at the 2004 Annual Meeting of Members and were approved by the Institute's Board of Directors at its first meeting of the 2003-2004 fiscal year.)
The financial reports confirm that TEI is well positioned to meet any financial challenges that may lie ahead. At the end of the 2003-2004 term, we added a Technology/Database Administrator to the Institute's staff and will soon hire a Communications Specialist to help us realize the potential of our new website and to implement the recommendations of our working groups. We ended the year with more than $4 million in net assets, funds that permitted us to implement a new website and conduct a corporate tax department survey. And we were able to do so without increasing dues or raising registration fees.
That TEI has been able to make progress on its goals and objectives during the past year--that we enhanced both member service and the quality and effectiveness of our communications--is a tribute to the unstinting efforts of many people. From our chapter presidents and committee chairs to our officers and our staff, TEI has a qualified group of people dedicated to advancing the organization's goals. I owe special thanks to the members of TEI's Executive Committee, whose dedication, intelligence, and vision--to say nothing of stamina--are amazing. My thanks are also due to the many members who selflessly shared their ideas, their insights, and their time with me and the Institute, and who extended personal courtesies too numerous to recount. Finally, I thank the Institute's staff for their unstinting efforts and good will.
What did I learn during my year as TEI President? Something very simple ... that by sharing information, tax executives can become empowered to advance their common goals, and at a personal level, that the more you give, the more you get back. For six decades, TEI has answered that call to duty, for the benefit not only of its members, but for the tax system as a whole. With the breadth, depth, and diversity of our membership, I believe our potential is virtually endless. Indeed, with Judy Zelisko and the team she has assembled, I have every confidence that the Institute will continue to advance.
Tax Executives Institute expresses its appreciation to the following firms that were Platinum sponsors of the 2003 Annual and 2004 Midyear Conference.
Baker & McKenzie Deloitte & Touche LLP Ernst & Young LLP KPMG LLP Mayer, Brown, Rose & Maw LLP McKee Nelson LLP PricewaterhouseCoopers LLP RIA
Raymond G. Rossi 2003-2004 International Presidents
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|Title Annotation:||2004 Annual Report|
|Author:||Rossi, Raymond G.|
|Date:||Sep 1, 2004|
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