THE HOUSE WAYS AND MEANS COMMITTEE held a hearing on November 10 on corporate tax shelters.
Congress may take action next year, although the committee chairman, Rep. Bill Archer (R.-Texas), remains skeptical about the need for such action. Archer said at the hearing, “The IRS has won case after case in tax court using the very tools Congress already provided. Now, our challenge is to focus efforts on stopping abuses while properly restraining new blanket authorities for the IRS that might chill legitimate business transactions.”
At the hearing, the Joint Tax Committee staff repeated its list of recommendations from last summer. The staff wants tougher penalties, higher standards for tax opinions, and a shifting of penalties from the corporation to the tax adviser where a transaction is done with an opinion from the tax adviser that the transaction works. It also wants corporations to have to disclose the details of corporate tax shelter transactions to the IRS with perjury statements signed by the chief financial officer at the company.
Separately, the American Bar Association is urging the IRS to modify “Circular 230” to bar tax advisers from assuming key facts, including whether a transaction has a sufficient business purpose, when writing more-likely-than-not opinions in future. The ABA made the recommendation in a report in early November.