[Congressional Record Volume 149, Number 148 (Tuesday, October 21, 2003)]
[Senate]
[Pages S12965-S12966]
From the Congressional Record Online through the Government Publishing Office [www.gpo.gov]




               AUDITOR INDEPENDENCE AND TAX SHELTERS ACT

  Mr. BAUCUS. Mr. President, I rise today in support of Senator Levin's 
bill, S. 1767, the Auditor Independence and Tax Shelters Act. I am 
pleased to be an original cosponsor. The Auditor Independence and Tax 
Shelters Act compliments the legislation that I introduced last year, 
the Tax Shelter Transparency Act.
  Just this year, the Tax Shelter Transparency Act has been passed by 
the Senate Finance Committee four times--in the Energy bill, the CARE 
Act, the Jobs and Growth bill, and most recently as part of the 
Jumpstart Our Business Strength Act. The same legislation has passed 
the full Senate three times--in the Energy bill, the CARE Act, and in 
the Jobs and Growth bill.
  Senator Levin's legislation shuts down tax shelter promotion from the 
audit and financial statement side of the equation. Specifically, S. 
1767 would strengthen auditor independence by prohibiting them from 
providing tax shelter services to their audit clients. The legislation 
would also reduce potential auditor conflicts of interest by codifying 
four auditor independence principles to guide the audit committees of 
the Board of Directors of a publicly traded company, when that 
committee is required by the Sarbanes-Oxley Act to decide whether the 
company may provide certain non-audit services to the corporation.
  The proliferation of abusive tax shelters has been referred to as our 
nation's most significant tax compliance problem. The development, 
selling, and buying of tax shelters has also been characterized as a 
``race to the bottom.'' The New York State Bar Association said ``the 
constant promotion of these frequently artificial transactions breeds 
significant disrespect for the tax system, encouraging responsible 
corporate taxpayers to expect this type of activity to be the norm, and 
to follow the lead of other taxpayers who have engaged in tax 
advantaged transactions.''
  Simply put, this is unacceptable. It has been 2 years since the 
collapse of Enron. The Sarbanes-Oxley Act took significant steps to 
restore confidence in corporate America. But, when it comes to ensuring 
auditor independence, Sarbanes-Oxley did not go far enough. The passage 
of the Auditor Independence and Tax Shelters Act will help ensure that 
last year's corporate reform efforts have their intended effect of 
restoring real independence to the ``independent audit.''
  This morning, the Senate Finance Committee held a hearing on tax 
shelters. We learned that the tax shelter problem is widespread. Tax 
shelter schemes are not just an Enron and Arthur Andersen phenomenon. 
They are

[[Page S12966]]

developed and promoted by accounting firms, law firms, and investment 
banks. Many corporations and individuals purchase tax shelters.
  To give you an idea of the burden they are placing on these honest 
taxpayers--during the 1990s alone--actions taken to shut down the tax 
shelters that we knew about saved the American taxpayer $80 billion. 
More recently, a study commissioned by the IRS estimates the current 
cost to honest taxpayers ranges from $14 billion to $18 billion a year. 
That is up to $180 billion over ten years. I am simply unwilling to 
tell the schoolteacher in Montana that he needs to pony up a little 
more because Congress is unwilling to shut down a loophole that is 
costing tens of billions every year.
  However, since the collapse of Enron, the Congress has failed to 
enact a single piece of tax legislation to curb tax shelter abuses. The 
time has come to shut down these abusive practices. I urge all of my 
congressional colleagues in the House and the Senate--to support the 
Auditor Independence and Tax Shelters Act and the Tax Shelter 
Transparency Act and send both of these pieces of tax shelter 
legislation to the President for his signature by the end of the year.

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