[Congressional Record (Bound Edition), Volume 145 (1999), Part 8]
[House]
[Page 11922]
[From the U.S. Government Publishing Office, www.gpo.gov]



              THE ABUSIVE TAX SHELTER SHUTDOWN ACT OF 1999

  Mr. DOGGETT. Mr. Speaker, long ago, Will Rogers suggested that, 
``people want just taxes even more than they want lower taxes. They 
want to know that every man is paying his proportionate share according 
to his wealth.''
  Today, some of our worst tax inequities arise from those who use 
abusive tax shelters to exploit loopholes in the Tax Code. To stop 
these, and to make our tax system more fair and just, I am introducing 
the Abusive Tax Shelter Shutdown Act of 1999.
  Forbes Magazine, which proudly proclaims itself ``The Capitalist 
Tool,'' recently reported on, as the cover of the magazine says, what 
are called ``Tax Shelter Hustlers: Respectable accountants are peddling 
dicey corporate tax loopholes.'' Here on the cover, we see the fellow 
with the fedora standing in the shadows. Unlike those supermarket 
tabloid stories about UFO abductions, with this particular cover, the 
substance inside actually lives up to the teaser on the cover. It is 
true that most abusive tax shelters are already against the law. The 
problem is that every time we shut down one, more spring up. That is 
not by accident because, as Forbes also reported, some of the Big 5 
accounting firms actually have teams of staffers, and my guess is that 
most of them dress a little better than this fellow does, who are out 
there and have as their job to come up with one new tax shelter every 
single week.
  Deploring what he calls the ``energy, creativity and viciousness'' of 
these so-called ``shelter shops,'' Calvin Johnson, a professor of tax 
law at the University of Texas, has labeled these hustling operations 
``skunk works'' because of the sorry odor surrounding their fouling of 
our tax system. The literal hustling of improper tax shelters is so 
commonplace that one representative of a Texas-based multinational 
corporation has recently indicated that he gets a cold call every day 
from someone hawking or hustling one of these shelters.
  Some are even called black box proposals. They are kept under wraps 
and they are not offered to any but a select few so as to avoid public 
notoriety. As a partner at one national firm boasted, ``A whale cannot 
get harpooned unless it surfaces for air.''
  What a whale-sized gulp of arrogance toward honest taxpayers 
everywhere who dutifully file our returns on April 15 and who have to 
make up for the taxes that the big boys dodge.
  My legislation will curtail egregious behavior without impacting 
legitimate business deals. It will eliminate the well-justified feeling 
that these high rollers are cheating and gaming the system, a feeling 
which leads to distrust and disrespect on behalf of our taxpaying 
public.
  This bill seeks to shut down abusive tax shelters by prohibiting loss 
generators. These are transactions that lack any legitimate business 
purpose that are ginned up just to obtain another tax loss, credit or 
deduction in order to dodge taxes.
  The second thing the bill does is it says that a company which thinks 
it has a proper shelter will be required to provide complete, clear and 
concise disclosure, verified by a corporate officer. This does not make 
them forfeit their buried pirate treasure but on these complex 
transactions it does require them to give up the map where X marks the 
spot of the treasure.
  These disclosure provisions were drafted based on the sound advice of 
tax practitioners; not the kind of practitioner that is proud to define 
their success by having another loophole named after them, but the 
thoughtful commentary of the tax section of the American Bar 
Association.
  The third provision is directed to the penalty for tax dodging, and 
we tighten and increase the penalty for such tax dodging. Just getting 
some thick carpet, downtown lawyer to bless what the accounting 
department has contrived with the help of these tax shelter hustlers is 
no longer going to be sufficient to save a corporation from penalties 
if it has clearly stepped over the line with an abusive tax shelter.
  These abusive tax shelters have grown and have become so extensive 
that some experts estimate that they account for $10 billion a year in 
lost tax revenue. Typical is a recent ad selling a guide to offshore 
tax shelters that ran in the Wall Street Journal. Featuring a happy, 
smiling, bikini-clad couple, sipping cocktails on the beach, obviously 
enjoying the good life at someone else's expense, the ad promised, 
``Live simply and easily make a tax-free fortune using the world's most 
exotic places,'' and you can do all this, it claimed, ``in complete 
privacy and full protection from everyone, including your spouse, 
competitors, partners and more.''
  Such schemes suggest the challenge that we face. Surely if locally 
owned businesses in central Texas can play by the rules, the big boys 
should, too. The Abusive Tax Shelter Shutdown Act is not a panacea but 
it will help law enforcement close some loopholes, eliminate the sham 
transactions and stop the hustlers.
  As we say in Texas, move 'em out and shut 'em down.

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