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Tax Executives Institute--U.S. Department of the Treasury Liaison Meeting Minutes.

February 22, 2000

On February 22, 2000, a delegation from Tax Executives Institute met with acting Assistant Secretary of the Treasury Jonathan Talisman and other representatives of the Treasury Department's Office of Tax Policy. The minutes of that meeting are reprinted below.

I. Introductory Comments

On behalf of the U.S. Treasury Department's Office of Tax Policy, Acting Assistant Secretary Jonathan Talisman welcomed TEI President Charles W. Shewbridge, III, and the other members of the delegation from Tax Executives Institute to the liaison meeting. On behalf of TEI, Mr. Shewbridge thanked the Treasury representatives for meeting with the Institute. The U.S. Treasury Department's and TEI's delegations at the liaison meeting are set forth below.

Mr. Shewbridge thanked the Assistant Treasury Secretary for agreeing to speak at the Institute's upcoming Midyear Conference. TEI values its relationship with the Treasury Department, he said. Although we may disagree on particular issues, he stated, we have many common goals and shared successes, e.g., the recent legislation to protect the confidentiality of advance pricing agreements.

Mr. Talisman stated that it is always helpful to have TEI's thoughts on issues. He noted that the Treasury Department is in the process of drafting its business plan for the year and invited TEI's comments on what items should be included. [Note: The Institute's comments on guidance priorities was submitted to the Treasury Department on March 6, 2000.]

Mr. Shewbridge noted that the Administration's FY2001 Budget was released after the Institute's agenda for the meeting was submitted. He invited the Treasury representatives to discuss the items affecting corporate taxpayers. Mr. Talisman explained that the Administration's budget proposals include a $250 billion net tax cut and $100 billion in revenue offsets, many of which are designed to address abusive corporate tax shelters. The budget also includes several new international initiatives, including provisions to target so-called tax havens. The latter provisions are designed to foster more information sharing, he stated.

Mr. Mikrut stated that the nonshelter initiatives primarily focus on specific transactions, particularly in the financial area. He cited the proposal in respect of tracking stock, which he said was not contemplated by the drafters of Subchapter C. Other proposals address divisive "D" reorganizations and downstream mergers. He invited TEI's comments on the various provisions. Mr. Talisman added that taxpayers often view the release of the budget as the end of the process, not the beginning. He noted that TEI's comments on the Treasury Department's White Paper on corporate tax shelters were carefully reviewed by Treasury and changes were made to the provisions set forth in the FY2001 Budget. We welcome the same input on all our proposals, he emphasized, adding that Treasury valued the Institute's real-world perspective. He cautioned, however, that taxpayers should not wait until the end of the process to make their concerns known.

Mr. Murphy noted that the budget again includes a proposal to tax the investment income of section 501(c)(6) organizations. The Institute believes the proposal reflects unsound tax policy and will submit comments, he said. Mr. Talisman remarked that the Treasury Department and TEI have policy differences about the proposal. He asked whether there were ways in which the proposal could be amended to address the Institute's concerns, perhaps by permitting a certain build up of reserves. If so, please let us know, he added. [Note: The Institute's comments on the proposal were submitted on March 8, 2000.]

Mr. McCormally referred to the Administration's proposal to require all payments to entities located in "identified tax havens" to be reported on the taxpayer's tax return. He noted that the proposal is reminiscent of the boycott list of section 999. The proposal generates process concerns, he added, such as how countries will be selected and how often the list will be updated. Mr. Talisman replied that the proposal focuses on certain criteria that will encourage countries to be more open and willing to dealing with the Treasury Department, for example, through information sharing. We want to expand information exchange, he stated, adding that Treasury is committed to working with the Organisation for Economic Cooperation and Development on its unfair tax competition project.

Mr. Rossi inquired whether the tax haven initiative is intended to complement or supplant the Treasury's Subpart F study. Mr. Talisman explained that the Subpart F study will address deferral and policy questions, while the tax haven initiative is aimed at encouraging countries to cooperate with the United States' information needs. The Subpart F study will not obviate the tax haven proposal in the President's budget.

II. Tax Simplification

Turning to the written agenda, Mr. Shewbridge explained that the Institute's agenda for the meeting has a common theme of simplification of the tax laws. TEI's mission is to encourage compliance with the law at the least cost to government and the taxpayer. If the laws were less complex, there would be fewer opportunities for taxpayers to engage in corporate tax shelter activity. Mr. Shewbridge explained that TEI has undertaken a joint simplification project with the American Bar Association's Section of Taxation and the American Institute of Certified Public Accountants' Tax Division. The report of these three organizations will be released later in the week and will include recommendations for simplifying provisions affecting both individual and business taxpayers. Given the budget surplus, he stated, TEI believes that the time is ripe for simplification.

Mr. Glennie remarked that there is a recognition in both the United States and Canada that complex legislation acts as a brake on commerce. Complexity is counterproductive to a self- assessment system of taxation and makes it difficult for the taxing authorities to audit taxpayers efficiently. Governments need to raise revenue, he concluded, but they must do so in an efficient manner.

Mr. Talisman stated that Treasury's Office of Tax Policy strives for simplification, but admitted that such a goal may not always be achieved. The budget does contain several simplifying proposals, for example, in respect of the alternative minimum tax. The Assistant Secretary cited the pressure to put new social programs in the Code and added that Treasury has tried to craft new initiatives -- such as the long-term care credit -- as simply as possible. At the same time, he recognized that there is a concern that the Code has reached its equilibrium. Is there a better mechanism to implement the policy? he asked rhetorically. He noted that the focus of simplification efforts has traditionally been on individuals and invited the Institute's comments on areas that concern corporate taxpayers.

Mr. Glennie referred to several recommendations in the joint TEI-ABA-AICPA simplification project that would affect business taxpayers: the permanent enactment of the so-called extenders package, a safe harbor for corporate estimated taxes, and the repeal of the corporate alternative minimum tax (AMT). Mr. Talisman noted that last year the Clinton Administration succeeded in obtaining a five-year extension of the research and development (R&D) credit, which was all that revenue constraints permitted. The Administration took a cautious approach to the surplus, which, if sustained, may lead to a permanent enactment of the provision, he stated.

Mr. Ashby explained that the recent legislation included two "suspension period" provisions, providing that R&D expenditures incurred during the suspension periods are taken into account in subsequent periods "through the filing of an amended return, an application for expedited refund, an adjustment of estimated taxes, or other means that are allowed by the Code." He noted that where taxpayers claim research credits from the suspension period in excess of $1 million, the Joint Committee on Taxation's refund review procedures under section 6405 may be implicated. Absent the suspension period provisions, the credits would be claimed as a reduction in the taxpayer's liability on its tax return for the period rather than through a refund claim.

Mr. Talisman admitted that this was the first time the issue of the Joint Committee review process has been raised. The Treasury Department will consider including the issue on the business plan, he stated, although he questioned how pressing the issue is since the suspension periods affect only two years.

Referring to the other simplification proposals, Mr. Boocock noted that the corporate AMT creates enormous complexity and hits capital-intensive companies particularly hard. Mr. Ashby remarked that in the past Treasury has viewed safe harbors as a one-way street. Safe harbors for corporate estimated taxes or R&D expenditures would make the law simpler, he stated. He asked how Treasury viewed safe harbors in general. Mr. Talisman replied that it depended upon the context. Safe harbors are useful to redirect government and private resources, he stated, adding that the Treasury Department has proposed several.

III. Guidance Priorities

A. Capitalization Issues. Mr. Shewbridge inquired what items may be on the IRS/Treasury 2000 Guidance Priority Business Plan. Mr. Mikrut replied that several issues will be carried over from the 1999 priority list. For example, six capitalization issues were on the prior year's plan, of which three projects were completed. (The three outstanding items include the treatment of cyclical maintenance costs, sales commissions paid to obtain new customers, and mutual fund launch costs.) In addition, as a result of the prior month's conference on "INDOPCO: Past, Present & Future," Treasury is considering whether a broader approach to capitalization issues can be developed. The fact-intensive nature of the issue may not lend itself to a global solution, he said, but broader guidance may be possible. Mr. McCormally suggested that a recurring expenditure could be one criterion for determining whether an item should be capitalized. Mr. Mikrut stated that Treasury is considering issuing more focused guidance on issues such as recurring items, a de minimis rule, a plan of rehabilitation, and the definition of a repair. As more guidance is developed, he concluded, taxpayer concerns should ease.

Mr. Goldstein suggested that Treasury seek taxpayer guidance on capitalization issues, especially those that are specific to a particular industry. He cited a recent technical advice memorandum (TAM 199952069) relating to long-term service contracts that may have broad applicability. Mr. Goldstein expressed concern that, although the facts were specific to one company IRS agents may inappropriately apply the TAM to taxpayers in the same industry and, indeed, to all taxpayers.

Mr. Mikrut explained that Treasury may not learn about a specific TAM until it is published. The Department does not review such guidance in advance, he stated, because very few raise policy issues that require Treasury's review. Mr. Talisman suggested that taxpayers keep the Treasury Department informed of problems created by overbroad rulings. We may not know when industry- specific guidance affects other taxpayers, he added.

Mr. Rossi inquired about the effect of the IRS's new Published Guidance Committee on guidance. Mr. Talisman expressed hope that the new organization will help identify issues before they become problems. Mr. Solomon averred that Treasury should not be involved in every TAM. The IRS must have the discretion to issue taxpayer-specific guidance in a timely manner, he said, adding that Treasury involvement with private letter rulings and TAMs would impede that process. There needs to be a balance between resolving specific taxpayer issues and addressing broad policy concerns. If a particular ruling adversely affects other taxpayers, perhaps taxpayers should contact Treasury, he added.

Mr. McCormally suggested that the real issue is the mix of guidance. If a TAM is the only published guidance on an issue, then agents will of necessity turn to it in resolving audit. disputes. He asked whether the mission of the Published Guidance Committee is to reduce such problems. Mr. Talisman stated that the committee will not seek to resolve tax policy issues, but rather to identify such concerns. If issues arise that are not on the business plan, the IRS and Treasury will be able to address them in a timely fashion. He noted that private rulings that are determined to have sent the wrong signal about an issue can be (and have been) addressed in published guidance.

Mr. McCormally asked whether the IRS will issue more revenue rulings in the future. Mr. Talisman stated that the mix of guidance must be reviewed, but noted that Treasury and the IRS will not establish a quota for revenue rulings. The government must maximize its resources, he stated, adding that if a regulation addressed INDOPCO-type issues, it would perhaps obviate a dozen rulings. Mr. Solomon stated that one goal of the IRS's Published Guidance Committee is to encourage the field to bring issues to the National Office's attention sooner than currently occurs.

Mr. Boocock stated that merely eliminating the "junk" adjustments would help. Mr. Talisman agreed, adding that although there is no magic bullet for resolving capitalization issues, broad issues may be capable of resolution.

B. Proposed Regulations on Qualified Research. Mr. Ashby inquired about the status of the proposed regulations on qualified research. He noted that, in the Conference Agreement to the 1999 Tax Relief Extension Act (Pub. L. No. 106170), Congress urged Treasury to consider comments regarding the definition of qualified research, especially those relating to the "common knowledge" standard. Mr. Talisman stated that Treasury has met with many industry groups concerning the regulations and their comments will be taken into account. He added that no decision has been made on whether the regulations will be issued in proposed or final form. Mr. Ashby recommended that the regulations be issued in proposed form to permit further comment by taxpayers.

IV. Corporate Tax Shelters

Mr. Cohen referred to the Treasury Department's July 1999 report on tax shelters.(1) TEI recognizes that over-aggressive tax-advantaged products are being marketed and we agree that this poses a challenge to the efficacy of the tax system, he explained. Targeted measures are needed, he said, along with the effective administration of the law. Mr. Cohen expressed concern, however, that a clear definition of "tax shelter" is needed to avoid impairing legitimate tax planning transactions. He suggested that the focus be on objective filters or indicators that trigger a reporting, or disclosure, obligation.

Mr. Cohen identified three key areas where action is needed:

* To facilitate the administration of the law (i.e., the examination of transactions and the publication of timely guidance shutting down abusive transactions), tax shelter promoters and taxpayers should be obliged to provide meaningful disclosure of transactions. An effective early warning disclosure regime is needed that will identify not only large taxpayers in the Coordinated Examination Program (CEP), but non-CEP taxpayers as well.

* The risk-reward profile for promoters must be altered. A penalty for promoters is needed to make the fees -- the "oxygen" of the problem -- uneconomical.

* Law firms that issue opinion letters on transactions should be required to perform their own due diligence. Opinion letters should not be issued on assumed facts.

Mr. Cohen then summarized TEI's objections to the various corporate tax shelter proposals. Proposals for a separate attestation of a transaction by a senior corporate officer, especially when accompanied by the imposition of personal liability for the filing of an inaccurate attestation, should be rejected, he said. The approach is dangerous and could lead to "witch hunts" to determine what the chief financial officer knew and when he knew it. In addition, there is no need to codify the economic substance doctrine. Fifty years of case law is sufficient to address the problem, he explained. Moreover, Mr. Cohen urged that any increase in the penalty from 20 to 40 percent be rejected. Finally, he cautioned that the penalty structure itself should not be made more complex with a variety of different standards. A clear standard that does not rely on arithmetic precision should be adopted.

Mr. Talisman agreed that effective disclosure is an essential element of an effective administrative plan. He said the Treasury took TEI's comments into account in revising the FY2001 Budget proposal to include more objective filters. The Treasury also revised the provision requiring disclosure 30 days after the transaction is entered into in response to the Institute's comments.

Mr. Shewbridge referred to the Administration's proposal to have both the taxpayer and the promoter file disclosure statements. If the promoter files the form, the taxpayer should not be required to do so as well, he suggested. Mr. Talisman asked about disclosure of transactions that are developed in-house. Mr. Cohen remarked that the vast amount of questionable transactions are developed by outside promoters. Mr. Shewbridge suggested an either/ or approach: either the promoter or the taxpayer be required to file. Mr. Talisman noted that the Treasury White Paper suggested that if the taxpayer knew the promoter had filed the required disclosure, the taxpayer would not be required to file. He asked what the sanction for non-disclosure should be. Mr. Cohen suggested that a penalty for failing to file the required disclosure should be imposed. He noted, however, that many taxpayers believe that there should be no penalty absent a finding that the taxpayer's treatment of the transaction was improper.

Mr. Talisman inquired whether the Institute would support a revision of the standard for non- disclosed tax shelter items. Mr. Cohen suggested that special rules for corporate tax shelters should not be implemented. He referred to the 1994 changes to the penalty provisions in respect of corporate tax shelters, which provided that the accuracy-related penalty can be avoided only if the taxpayer establishes that, in addition to having substantial authority, it reasonably believed that the treatment claimed was more likely than not the proper treatment of the item. Adequate disclosure has no effect on the application of the penalty in respect of tax shelters. Mr. Cohen asserted that the provision actually deters disclosure.

Mr. Talisman posed a hypothetical whereby the taxpayer has developed an in-house tax-advantaged product that it fails to disclose. Should the reasonable cause exception apply? he asked. Mr. Cohen repeated that some TEI members would support a penalty for the failure to disclose, while others believe that there should be no penalty without an understatement. Mr. McCormally stated that, if the taxpayer has substantial authority for its decision not to disclose a transaction, no penalty should be imposed. Moreover, any information-reporting penalty should not be tied to the amount of tax due. The Institute has not yet reached a consensus on the amount of any information-reporting penalty in respect of corporate tax shelters, Mr. McCormally added.

Mr. Solomon opined that the penalty must be sufficient to provide a meaningful incentive for taxpayers to file the disclosure statement. Mr. Boocock asserted that, given the complexity of the tax law, the reasonable cause exception is essential. If the taxpayer has reasonable cause and acted in good faith, he said, no penalty should be asserted. Mr. Cohen opined that the penalty would spur disclosure by the promoters, adding that the number of transactions developed in-house is small. He stated that for promoters, section 6111 of the Code, requiring the registration of tax shelters, should be the standard.

Mr. McCormally noted that any legislative solutions must be integrated with the tax shelter project recently announced by the IRS's Large and Mid-Size Business (LMSB) Division. We must recognize that legislative fixes will not work unless the IRS uses the tools to take action in appropriate cases, he said. Mr. McCormally acknowledged that current law may not be perfect, but suggested that better enforcement of existing law is the key. Mr. Solomon agreed that whatever the law, the government must have a system in place to enforce it.

Mr. Murphy asked about the government's efforts to define the scope of the problem. Mr. Solomon stated that the situation today differs from the individual shelters that were shut down in 1986. The promotions are more secretive, he said, although the Treasury is acquiring more information to provide better estimates. Mr. Young asked how the estimates are compiled. Mr. Talisman responded that the revenue estimates are based on data from filed returns which are scored against a baseline. The resulting information may not be an accurate reflection of the activity in the marketplace, he added. Mr. McCormally noted that the revenue estimate for the FY2001 Budget proposal is higher than the estimate for the FY2000 proposal, although the provisions have been narrowed. Mr. Solomon stated that the estimate is based on better information than was available last year. Mr. McCormally remarked that the items taken into account in the revenue estimate by the staff of the Joint Committee on Taxation included corporate owned life insurance (COLI) products. He noted that current law permits no deduction for COLI. How does that affect the baseline? he asked. Mr. McCormally acknowledged that, even though taxpayers may not understand or agree with the revenue estimates, they must accept them. Combined with the tendency toward inflammatory rhetoric in the media about the issue, the revenue estimates help to create a "bunker" mentality.

Mr. Talisman noted that Treasury may shut down transactions such as BOSS or LILO and "son of LILO" will pop up. We need a more global solution, he stated, rather than attacking problems on an issue-by-issue basis. Mr. Cohen suggested that the proposed promoter penalty of 50 percent of the fees generated should take away any incentive to engage in tax shelter transactions. Mr. Talisman noted that the promoters attack the penalty as confiscatory and suggest that a penalty should be imposed on the corporations.

Mr. Young suggested that the promoter fees are driving corporate tax shelters. Mr. Talisman noted that if corporations did not have an appetite for the products, the promoters would not exist. It is a chicken-or-egg issue, he said; Treasury believes that it is appropriate to impose sanctions on all parties. Mr. Young reiterated that in his opinion promoters are key to "creating the appetite" for tax-shelter products.

Mr. Murphy explained that TEI supports giving the Commissioner the tools he needs to attack the problem. The environment is different from the tax shelter issues of the 1980s, he said, where the government knew the scope of the problem. He expressed frustration with the lack of information about the scope of the current problem. Whatever the solution, he concluded, it is the IRS that must enforce the law. Mr. Solomon stated that Treasury's emphasis is on disclosure by both taxpayers and the promoters with a heavy emphasis on penalties for promoters. Mr. Cohen stated that TEI believes that consideration should be given to enacting a new penalty on tax practitioners and strengthening Circular 230 to increase accountability.

Mr. Shewbridge expressed concern about the definition of corporate tax shelters. Not all transactions such as COLI are shelters, he said. Without a clear definition, the proposed legislation may well sweep legitimate tax planning transactions into the net.

Mr. Talisman outlined the areas where Treasury and TEI agree action is needed: an increase in disclosure, the imposition of a promoter penalty, and the decreased reliance on adviser opinions. We want to work with you to address the problems with the budget proposals, he explained. He emphasized that the Treasury Department has not rushed into this issue, noting that it issued the White Paper last year in order to obtain taxpayers' input. To the extent the Treasury can refine the proposals and still address the government's concerns, we will listen, he concluded.

Mr. McCormally referred to the proposal to codify the economic substance doctrine and asked whether the Treasury Department has drafted any statutory language. Being able to review the language would help TEI formulate its position, he stated. Mr. Talisman replied that the language would not be available until Congress decides which direction to take. He suggested reviewing the provisions of the bill proposed by Congressman Doggett.

V. Penalty and Interest Provisions

Mr. McDonough referred to recent studies by the Treasury Department and the staff of the Joint Committee on Taxation on the penalty and interest provisions of the Code.(2) TEI testified last month at a hearing held by the Oversight Subcommittee of the House Ways and Means Committee. Mr. McDonough singled out two subjects discussed by TEI at the hearing:

* The interest-rate differential should be repealed in its entirety and the interest charged on under- and over-payments should be equalized.

* The estimated tax penalty should be converted to an interest charge and a safe harbor should be created for all taxpayers, corporations and individuals.

Mr. Shewbridge noted that calculation of estimated taxes is not an exact science. Ms. Zelisko added that, as a practical matter, the only effective "safe harbor" available to corporate taxpayers is to overpay their taxes.

Mr. Talisman asked whether a safe harbor of 115 percent of the prior year's taxes -- which is the safe harbor available for higher-income individuals -- would be appropriate. Mr. McCormally stated that a 115-percent safe harbor would be a valid starting point. Other TEI representatives agreed that such a safe harbor would be better than the annualization method, which is the only safe harbor available to corporations now and which is extraordinarily complicated. Mr. Ashby added that cyclical companies find it almost impossible to estimate tax liability. Mr. Shewbridge suggested as an alternative that the government pay interest on the over-payments. Mr. Mikrut referred to a recent change in the cut-off date for the annualization method and asked whether it was helpful. Ms. Zelisko replied that the change does not help companies in cyclical industries. Mr. Boocock explained that companies use the best information available to calculate the estimated tax liability, but the data often do not have the degree of accuracy required to calculate the liability. Ms. Zelisko agreed, noting that there are too many variables that have to be considered.

Mr. Mikrut explained that converting the estimated tax penalty to an interest charge makes it more difficult to abate the charge. Mr. Goldstein stated that taxpayers would trade the ability to abate the penalty for a deduction for the interest charge. Mr. Mikrut inquired how well the IRS audits a corporation's estimated taxes. Mr. McCormally said that the item is not generally audited because companies overpay to avoid the penalty.

Mr. Mikrut then asked whether taxpayers would calculate the liability under both the annualization and safe harbor methods. Mr. Ashby remarked that he would use the safe harbor method. Taxpayers would consider how much time is saved by using the method and many companies would find that the efficiency is more valuable than calculating the liability under both methods, he stated. Mr. Boocock agreed, adding that the safe harbor would permit companies to cut the amount of inquiries to subsidiaries for information in half. Mr. Shewbridge cautioned, however, that enactment of a safe harbor would not eliminate the need for the annualization method. Taxpayers should be permitted to choose either method, he said.

Mr. Mikrut stated that the Treasury Department is not opposed to the enactment of a safe harbor, but added that the revenue estimate could undercut the provision's viability.

VI. Requests for Status Report

A. Foreign Sales Corporations. Mr. Rossi referred to the European Union's complaint with the World Trade Organization, alleging that the foreign sales corporation (FSC) provisions of the Code (i) constitute an "export subsidy" under the WTO Code of Conduct on Subsidies and Countervailing Duties; (ii) is an "import substitution subsidy" under the WTO Code; and (iii) violates the "national treatment" rule in Article III of the General Agreement on Tariffs and Trade. A WTO dispute settlement panel agreed last year with the EU and the United States' appeal is pending. If the decision goes against the United States, he asked, will a replacement system be in place to meet the WTO's October 1, 2000, deadline?

Mr. Mikrut explained that any legislation relating to FSCs is a high priority for Treasury. Because of the posture of the case, however, Treasury is not ready to discuss solutions.

Mr. Boocock referred to Rev. Proc. 99-19, which sets forth procedures for implementing the interest-netting rules. One issue that was not answered in the procedure is the application of the "same taxpayer" rule to under- and overpayments of a FSC and its related supplier. While the FSC is not part of the affiliated group, the interdependence of the two entities is so great that they should be treated as the same taxpayers for purposes of the interest-netting rule, he explained. Mr. Mikrut remarked that legislation may be needed to treat the FSC and its related supplier as one taxpayer.

B. Subpart F Study. Mr. Rossi inquired about the status of the Treasury Department's study of the Subpart F provisions. Mr. Mikrut suggested that TEI contact Treasury's International Tax Counsel Philip R. West, who was unable to attend the meeting.

C. Depreciation Study. Mr. Boocock referred to section 2022 of the Tax and Trade Relief Extension Act of 1998 (Pub. L. No. 105-277), which requires a comprehensive study of the recovery periods and depreciation methods under section 168 of the Code. The study is due by March 31, 2000.

Mr. Mikrut reported that Treasury has requested comments on the study and has met with several groups of taxpayers to discuss possible approaches. Most industries believe the useful lives are too long, he added. The study will attempt to identify the factors that should determine useful lives. Given the rapid technological changes, a static system is ill advised.

Mr. Shewbridge noted that in some industries assets have not been assigned class lives. Mr. Mikrut noted that there is a default in current law for such items. He suggested that the IRS's new pre-filing agreement program may be an appropriate vehicle to address issues relating to class lives.

D. Electronic Commerce. Mr. Rossi referred to the upcoming meeting in Dallas of the Advisory Commission on Electronic Commerce. He asked for a status report on Treasury's activities concerning the issue. Mr. Mikrut stated that Treasury has been active in the area for several years. We are reviewing the issues now, he said, not just for reporting purposes but for income tax purposes as well.

VII. Conclusion

On behalf of TEI, Mr. Shewbridge thanked the Treasury Department representatives for their participation in the meeting. On behalf of the Treasury Department, Mr. Mikrut expressed his appreciation for the time and effort the TEI representatives put in to prepare for the meeting and urged the Institute to continue to bring issues to the attention of the Treasury Department.

Treasury Department Delegation

Jonathan Talisman, Acting Assistant Secretary (Tax Policy) Eric Solomon, Acting Deputy Assistant Secretary (Tax Policy) Joseph M. Mikrut, Tax Legislative Counsel

TEI Delegation

Charles W. Shewbridge, III (BellSouth Corporation), TEI President Betty M Wilson, TEI Senior Vice President Robert L. Ashby (Nortel Networks Inc.), TEI Secretary J. A. (Drew) Glennie (Shell Canada Limited), TEI Treasurer Stephen W. Boocock (Allegheny Technologies, Inc.), TEI Executive Committee Stuart D. Goldstein (Lockheed Martin Corporation), TEI Executive Committee Raymond G. Rossi (Intel Corporation), TEI Executive Committee Judith R Zelisko (Brunswick Corporation), TEI Executive Committee Philip G. Cohen (Unilever United States Inc.), Chair, TEI Federal Tax Committee Robert J. McDonough, Jr. (Getronics NV), Chair, TEI IRS Administrative Affairs Committee Reginald G. Young, Jr. (The Quaker Oats Company), Vice Chair, TEI International Tax Committee Michael J. Murphy, TEI Executive Director Timothy J. McCormally, TEI General Counsel and Director of Tax Affairs Mary L. Fahey, TEI Tax Counsel Jeffery P. Rasmussen, TEI Tax Counsel

(1) Office of Tax Policy, U.S. Department of the Treasury, The Problem of Corporate Tax Shelters: Discussion, Analysis, and Legislative Proposals (July 1999). The staff of the Joint Committee on Taxation also addressed corporate tax shelters in its penalty and interest study. Staff of the Joint Committee on Taxation, Study of Present-Law Penalty and Interest Provisions as Required by Section 3801 of the Internal Revenue Service Restructuring and Reform Act of 1998 (Including Provisions Relating to Corporate Tax Shelters) (JCS-3-99) (July 22, 1999).

(2) Office of Tax Policy, U.S. Department of the Treasury, Report to the Congress on Penalty and Interest Provisions of the Internal Revenue Code (October 1999) (hereinafter cited as the "Treasury Report"); Staff of the Joint Committee on Taxation, Study of Present-Law Penalty and Interest Provisions as Required by Section 3801 of the Internal Revenue Service Restructuring and Reform Act of 1998 (Including Provisions Relating to Corporate Tax Shelters) (JCS-3-99) (July 22, 1999).
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