Chief executive officers will be required to certify corporate tax returns if a highway bill containing the certification provision as a rider survives the legislative process.
The Senate Finance Committee has approved a highway funding bill that contains a rider requiring CEOs to certify under penalty of perjury that they have policies and procedures in place intended to assure the accuracy of corporate tax returns. The bill is scheduled for full Senate consideration as early as this week.
Ochsenschlager
The Senate committee attached the certification requirement as a “revenue raiser” to the highway funding bill, meaning it sees the certification requirement as a way of raising money to offset the cost of highway construction projects, said Tom Ochsenschlager, vice president–taxation of the American Institute of Certified Public Accountants. Congress is under White House veto pressure to hit a funding threshold for the highway bill.
Mark Prysock, general counsel for Financial Executives International, said FEI’s Committee on Taxation opposes the measure, but has worked with members of Congress to at least soften the severity of the certification requirement. Originally, lawmakers wanted CEOs to certify that the return itself was accurate.
“Very few CEOs are tax experts,” Prysock said. “It’s easier for a CEO to attest that the procedures are in place to assure the accuracy of a return,” compared with expecting a CEO to certify that he or she “knows for a fact that the return complies with the code.”
Tax return certification has been under consideration in varying forms in Congress since at least 2002. Congress members see it as a way to discourage aggressive tax shelters, according to Ochsenschlager.
“The days of aggressive tax shelters are waning, if not completely abolished,” he said. “I think everyone’s gotten religion on this issue. They’re sort of fighting last year’s battles.”
Ochsenschlager says on one hand the provision stands little chance of passing Congressional muster and becoming law because there are too many powerful lobbying forces who will oppose it with strong arguments. “To the extent that tax shelters might still be an issue, certification wouldn’t be that effective at stopping problems if there were problems,” he said.
On the other hand, however, he said its status as a rider expected to raise revenue—because presumably tax returns will be less aggressive and therefore companies will pay more in taxes—increases the likelihood it could become law. “I’ve seen it happen many times here,” he said.
FEI’s Prysock disputes whether it’s safe to assume certification of tax returns will in fact increase revenue to the government. “I know the Joint Committee on Taxation is unwilling to attach a dollar figure,” he said. The Joint Committee is an advisory body that monitors federal tax policy and estimates impact of proposed changes.
The Tax Executives Institute has been a vocal opponent of measures to require CEOs to certify accuracy of tax documents. Calling the approach “misdirected and ill-founded,” TEI submitted a letter to senators in 2002 objecting to certification of the return itself.
“It would be rare that a CEO could be personally involved in, or knowledgeable about the plethora of tax rules that apply to literally thousands of transactions that are reflected in the company’s tax returns,” wrote then-president Drew Glennie.
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