Excerpts from the Remarks
of IRS Commissioner
Mark W. Everson
at National
Press Club
Courtesy of IRS March 15, 2005
...let me turn to enforcement of the tax laws.
Average Americans pay their taxes honestly and accurately, and have
every right to be confident that when they do so, their neighbors and
competitors are doing the same. Let me provide an overview of the steps
we have taken over the past year to bolster this confidence, turning
briefly to each of our four service-wide enforcement priorities.
Our first enforcement priority is to discourage and deter non-compliance,
with emphasis on corrosive activity by corporations, high-income individuals
and other contributors to the tax gap.
• In 2004, audits of high income taxpayers jumped 40 percent from
the year before. We audited almost 200,000 high-income individuals last
year – double the number from 2000.
• Overall, audits for individuals exceeded the one million mark
last year, up from 618,000 four years earlier.
• In 2004, audits of the largest businesses – those with
assets of $10 million or more – finally turned back up after years
of decline.
The centerpiece of our enforcement strategy is combating abusive tax
shelters, both for corporations and high-income individuals. I will touch
upon two important initiatives of the past twelve months.
We have started a program of settlement offers for those who entered
into abusive transactions in the past but would like to get their problems
behind them. Last May, we made a settlement offer regarding the Son of
Boss tax shelter, a particularly abusive transaction used by wealthy
individuals to eliminate taxes on large gains, often in the tens of millions
of dollars. In this program for the first time the IRS required a total
concession by the taxpayer of artificial losses claimed. Son of Boss
is also the first settlement initiative mandating penalties as a settlement
condition. I am pleased with the response to the offer. Next week we
expect to make public our Son of Boss results.
Last month we announced a second important settlement initiative – this
one involving executive stock options. This abusive tax transaction involved
the transfer of stock options or restricted stock to family controlled
entities. These deals were done for the personal benefit of executives,
sometimes at the expense of public shareholders. This shelter was not
just a matter of tax avoidance but in some instances raises basic questions
about corporate governance. Again, the settlement offer is a tough one:
full payment of the taxes plus a penalty.
A noteworthy point about the stock option settlement offer is that our
actions in this matter were closely coordinated with the Securities and
Exchange Commission and the oversight board that regulates public accounting
firms.
[To read the entire speech,
please click here.
