Government crackdown looming against corporate tax shelters | Norton Rose Fulbright
Donald C. Lubick, the assistant Treasury secretary for tax policy, told a Senate Finance Committee hearing on April 27 that the government’s current efforts against aggressive corporate tax planning are like “a greyhound in pursuit of a mechanical rabbit. We never really catch up.”
The Treasury wants to penalize corporations and their outside advisers that engage in “tax avoidance transactions.” Treasury prefers a somewhat vague definition of the term in the hope that companies will steer wide of the line. Meanwhile, the tax committee staffs in Congress have been meeting with outside groups in an effort to refine the definition and decide on the penalties.
One idea receiving serious attention is to require a corporate officer to sign a statement attached to the company’s tax return as to whether the company engaged in any large tax shelter and, if so, to attach a detailed description of the transaction. Stefan Tucker, chairman of the tax section of the American Bar Association, told the Senate Finance Committee in late April, “The required statement of business officers of the taxpayer should impose personal accountability . . . .” The ABA advocates a strict liability approach where a corporation would not be able to avoid penalties in certain tax-motivated transactions by showing it had reasonable grounds for its position. “[C]orporate taxpayers would be forced to incur a real risk from entering into such transactions, and would be induced to seek balanced, well reasoned tax advice concerning such transactions rather than tax opinions intended principally to serve as insurance against the imposition of penalties,” Tucker said.
If a corporation is penalized by the IRS, the ABA also wants a penalty “imposed on any outside advisers who rendered favorable tax opinions and promotors who actively participated in the sale, planning, or implementation of the tax shelter.”