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...Policy Solomon welcomed TEI President David L. Bernard and the other members of the delegation from Tax Executives Institute to the liaison meeting. Mr. Solomon said that he was pleased to be able to meet with TEI. Mr. Bernard congratulated Mr. Solomon on his appointment as Assistant Treasury Secretary.
The delegations for the Treasury Department and TEI at the liaison meeting are set forth above.
Pending Legislation
A. Administration's Fiscal Year 2008 Tax and Budget Proposals
Mr. Bernard noted that the Administration's fiscal year 2008 budget included several new requirements relating to the reporting of payments made to corporations, basis reporting on stock sales, and merchant credit card reimbursements. Mr. Bernard noted that a proposal to require the reporting of payments to corporations was opposed by TEI in the early 1990s, adding that despite technological advances, TEI's concerns remain. He explained that there are issues relating to reporting payments to corporations on a fiscal- vs. calendar-year basis, and those on the accrual vs. cash method of accounting. More fundamentally, the proposals would burden taxpayers who are already complying with the law. Finally, Mr. Bernard noted that the revenue estimate for the proposal is relatively small, but the cost of compliance will be high.
Mr. Solomon stated that the Administration is sensitive to the need to balance enforcement with the cost of compliance, adding that some have criticized the proposals as not sufficiently aggressive in attacking the tax gap. He noted that remarks by Treasury Secretary Henry M. Paulson the prior week show an appreciation for concerns about imposing the burden of compliance onto compliant taxpayers. This is an area where a dialogue is needed, he said, adding that Treasury fully appreciates TEI's concern about the additional administrative burden.
Mr. Desmond stated that the largest component of the tax gap is unreported income. He invited comments on ways in which the government can focus on that area, perhaps through the use of de minimis rules or thresholds.
B. Economic Substance Doctrine
Mr. McDonough observed that prior efforts to codify the economic substance doctrine have not succeeded, in significant part because of Treasury's opposition. TEI shares those concerns, he stated; codifying the doctrine would further complicate the system and raise significant issues of statutory construction. He asked whether the recent changes in Congress--including adoption of "pay-as-you-go" budget rules--have affected Treasury's position on the proposal or its view of the proposal's viability.
Mr. Desmond said that recent comments by Treasury officials generally echo TEI's concerns. He invited comments on technical aspects of the proposal that could improve it, for example, by minimizing ambiguity or carving out routine transactions. There is huge pressure to raise revenue, he explained, and the...
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