August 03,2001

Statement of Baucus and Grassley on Bipartisan Staff Proposal on Tax Shelters

Senate Finance Committee Chairman Max Baucus (D-Mont.) and Ranking MemberCharles E. Grassley (R-Iowa) today released a bipartisan staff proposal on tax shelters.

Today we are releasing a new draft proposal to address the continuing problem of taxshelters. Last Congress, Chairman Roth and Ranking Member Moynihan directed the staff of theSenate Finance Committee to design a legislative response to the growing problem of abusive taxshelters. The Finance Committee staff released a preliminary bipartisan staff proposal on May24, 2000, and a revised staff draft on October 5, 2000. At the beginning of the 107th Congress,we directed the staff to continue working on a legislative response to the problem of abusive taxshelter transactions. Pursuant to our instructions, the staff has prepared a new draft proposal.

We remain concerned that taxpayers continue to use abusive tax shelter transactions toavoid paying taxes that they properly owe. We are equally concerned, however, that anylegislative proposal not be overly broad so as to impede legitimate business transactions. Inaddition, we recognize that the Treasury Department has been working to develop and refineregulations designed to detect abusive transactions and do not want to interfere with those efforts.

In light of these concerns, the new draft proposal has been refocused to empha disclosure ofpotentially abusive transactions by both corporations and individuals and to prescribe meaningfulpenalties for all participants in tax shelter transactions who fail to comply with the Treasuryregulations.

The new draft proposal is intended to enhance the tax shelter regulations implemented bythe Treasury Department in February 2000. If, however, future experience with those regulationsindicates they are not effective in combating tax shelters, we will consider further action to targetabusive transactions.

We welcome comments on today’s new draft proposal, and ask that those comments besubmitted no later than September 4, 2001. Please direct your comments to John Angell,Majority Staff Director, and Kolan L. Davis, Republican Staff Director, of the Senate FinanceCommittee, 219 Dirksen Senate Office Building, Washington, DC 20510.