Advisory Committee on Tax Exempt and Government Entities (ACT ...

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Improving the Employee Plans Compliance Resolution System: A Roadmap For Greater ComplianceT:EP:RA:DC, located in Washington, D.C., prior to finalizing the closing agreement.The Manager, Voluntary Compliance may also be consulted during the negotiationphase of a closing agreement in other cases. 86After negotiations, if the Plan Sponsor refuses to agree to a sanction amount, the planinvolved will be disqualified and all sanctions and procedures resulting fromdisqualification (such as issuance of a 30-day letter) will apply.The ACT learned from its discussions with senior EP leadership that there are a numberof policy considerations overlaying the published guidelines, as follows:• Sanctions Must Be ConsistentConsistency and uniform treatment with respect to taxpayer-totaxpayertreatment, comparable-case-to-comparable-casetreatment, and area-office-to-area-office treatment was expressedas a strong policy goal.• Plan Disqualification Not a Favored OutcomeIn other than abusive cases, EP leadership expressed a desire towork with Plan Sponsors to achieve settlement under Audit CAP.Disqualification of plans with its attendant negative consequencesto plan Participants is to be avoided. On the other hand, PlanSponsors involved in abusive transactions are treated with littletolerance. 87• The Larger the Plan Sponsor, the Higher the SanctionEP leadership expressed the desire that sanctions achieve theintended result of discouraging non–compliant behavior. To thatend, the view was expressed that sanctions should becomeprogressively higher with the size of the plan to reflect the fact thatlarger employers will routinely have greater MPAs. The ACT viewsthis policy as lacking clear support – particularly in light of section1101 of the PPA, which expressly requires that the sanction not beexcessive and bear a reasonable relationship to the nature, extentand severity of the offense. Section 1101 does not require thesanction to bear a reasonable relationship to the size of the PlanSponsor or its bottom line.86 Id. at § 7.2.2.6.1.87 Remarks of Steven T. Miller, Commissioner, Tax Exempt and Government Entities, before the Great Lakes Benefit Conference,Chicago, May 3, 2007 reprinted TaxCore, Friday, May 4, 2007.ADVISORY COMMITTEE ON TAX EXEMPT AND GOVERNMENT ENTITIES (ACT) June 11, 2008 38
Improving the Employee Plans Compliance Resolution System: A Roadmap For Greater Compliance• Sanctions Must be Designed to Encourage Plan Sponsors to UtilizeVoluntary ComplianceA sanction imposed under Audit CAP must be higher than whatwould be imposed under voluntary compliance; otherwise, PlanSponsors would have no incentive to voluntarily comply. This lineof reasoning assumes that Plan Sponsors always have fullknowledge of Plan Failures and thus choose between propercorrection of every Plan Failure or leaving the Plan Failureuncorrected in the hopes that their plan will not be audited or thePlan Failure will not be discovered upon audit. In reality, PlanFailures discovered upon audit are often unknown to the PlanSponsor until the time of the audit. The issue of how much higher asanction should be remains elusive.Since a detailed analysis of the actual administration of Audit CAP is not available, and,to our knowledge, the Government Accounting Office has not conducted a review of theprogram, the ACT was unable to determine how close the actual operation of theprogram is to its policy objectives.2. Reasons For Improvement of Audit CAPThe ACT did not find empirical data indicating wide-spread practitioner dissatisfactionwith Audit CAP. Indeed, one might argue that the large number of cases that areresolved within TE/GE indicates just the contrary – widespread satisfaction with thesystem. 88 Additionally, the ACT has no information which suggests the Service is notearnestly and diligently administering the system in a fair and equitable manner.Nevertheless, there is some evidence that some skepticism exists in the practitionercommunity. 89 More importantly, section 1101(b)(5) of the PPA requires that theSecretary of the Treasury:…continue to update and improve the Employee Plan ComplianceResolution System (or any successor program), giving special attentionto…assuring that any…penalty or sanction that is imposed by reason of acompliance failure is not excessive and bears a reasonable relationship tothe nature, extent and severity of the failure. 90In light of the public skepticism, mild though it may be, and, in particular, theCongressional directive, as strong as it is, the ACT believes the current Audit CAPprocedures require improvement. Three aspects of Audit CAP, considered together,create an impression that it is less than balanced. First, Audit CAP is subjective.Specialists are directed to impose a sanction on the Plan Sponsor that will not be88 See Exhibit A.89 BNA Daily Tax Report, Mar. 5, 2007 “IRS Officials Reject Attorney’s Assertions Employee Plans Compliance Less Flexible.”90 PPA § 1101(b)(5).ADVISORY COMMITTEE ON TAX EXEMPT AND GOVERNMENT ENTITIES (ACT) June 11, 2008 39
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The Streamlined Closing Agreement F
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ADVISORY COMMITTEE ONTAX EXEMPT AND
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Tax Treatment Of Cellular Telephone
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IRC, 2007-CODE-VOL, SEC. 280F. LIMI
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15. Special Rules for Various Types
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Withholding RequirementsACCOUNTING
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