US Treasury Reveals New Strategy Over Tax Shelters

by Mike Godfrey, Tax-News.com, Washington

22 March 2002

Stung by the recent Enron debacle, the Bush administration moved into action on abusive tax shelters this week, with the release of Treasury proposals on the eradication of illegal sheltering of income on Wednesday, and a Senate Finance Committee meeting on Thursday on the issue.

The Treasury proposals, some of which require Congressional approval, include strengthening the requirement that tax sheltering arrangements be reported to the IRS, and extending the rules governing tax shelters beyond corporations, to take in trusts, partnerships, and high net worth individuals.

The Treasury package also advised the simplification of the rules over which transactions must be disclosed, a substantial increase in penalties for entities - corporate or otherwise - which refuse to comply, and a change in the law to prevent promoters of such schemes from evading the rules by calling themselves 'advisers'.

'Simply put, if a taxpayer is comfortable entering into a transaction, a promoter is comfortable selling it, and an adviser is comfortable blessing it, they should all be comfortable disclosing it to the IRS,' Assistant Treasury Secretary for Tax Policy, Mark Weinberger, explained at a press conference.

In a written statement explaining the need for the new Treasury proposals on tax shelters, Treasury Secretary, Paul O'Neill blamed the complexity of the US tax code for the number of abusive tax shelters available to US citizens and corporations, and expressed the hope that: 'These proposals will help us find and stop unscrupulous promoters who are marketing questionable transactions to taxpayers.'

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