Comments on transfer pricing penalty under Section 6662(e).
On February 28, 1991, the Internal Revenue Service issued proposed regulations under sections 6662 and 6664 of the Internal Revenue Code, concerning the accuracy-related penalty for substantial understatements of income tax, for negligence or disregard of rules and regulations, and for substantial valuation misstatements. The proposed regulations (IA-015-90) were published in the Federal Register on March 4, 1991 (56 Fed. Reg. 8959), and in the April 1, 1991, issue of the Internal Revenue Bulletin (1991-13 I.R.B. 24). (1) A public hearing was held on June 3, 1991. TEI submitted written documents on May 13, 1991, and testified at the public hearing. Regulations concerning transactions between persons described in section 482 and net section 482 transfer price adjustments were reserved under Prop. Reg. [subsection] 1.6662-5(j) and 1.6664-4(d) and are the subject of a separate regulation project (IA-035-91). In connection with that project TEI is pleased to submit these comments to supplement its original submission on section 6664(c)'s reasonable-cause and good-faith exception (hereinafter, "reasonable-cause exception") to imposition of the accuracy-related penalties.
Background
Tax Executives Institute is the principal association of corporate tax executives in North America. Our nearly 4,700 members represent approximately 2,000 of the leading corporations in the United States and Canada. TEI represents a cross-section of the business community, and is dedicated to the development and effective implementation of sound tax policy, to promoting the uniform and equitable enforcement of the tax laws, and to reducing the cost and burden of administration and compliance to the benefit of taxpayers and government alike. As a professional association, TEI is firmly committed to maintaining a tax system that works -- one that is administrable and with which taxpayers can comply.
TEI members are responsible for managing the tax affairs of their companies and must contend daily with the provisions of the tax law relating to the operation of business enterprises. We believe that the diversity and professional training of our members enable us to bring an important, balanced, and practical perspective to the issues raised by the proposed regulations under sections 6662 and 6664 of the Code and, in particular, the application of the reasonable-cause exception to the imposition of penalties for valuation misstatements in connection with net section 482 adjustments.
