Chief Counsel of the Internal Revenue Service, William Wilkins, spoke with attorneys attending the Chicago-Kent College of Law Federal Tax Institute on May 17, 2012 impressing the significant change in the operating environment for tax attorneys and practitioners which requires such professionals to respond with clear, risk-conscious advice to their clients about complex tax positions. Wilkins stated, “I believe there are increasing opportunities for you, as advisers and advocates, to provide great client service in ways that go beyond being the gladiator in the arena.” He continued by stating, “In your role as tax advisor in the examination setting, you can help mediate the sharing of business and legal knowledge that is critical to the prompt resolution of tax uncertainty. And in your role as tax advisor on business transactions, you can help provide your clients with the clear understandings of risk and opportunity that they need to make choices that are suitable for them.”
Wilkins’ comments come in light of new corporate approaches to tax risk caused by certain key factors, including:
- The evolution of financial accounting practices that require a comprehensive analysis of reasons for claiming a tax benefit and reserving against tax benefits;
- Wider attention to the impact of tax uncertainty on reported earnings;
- The leveraging of financial reporting for tax compliance, particularly with the adoption of Schedule UTP (Uncertain Tax Positions);
- Decisions by foreign tax authorities, including the United Kingdom and Australia, to assess the tax risk profile of large business taxpayers
- The emergence of new legal structures, including whistle-blower rules, that create obligations for reporting certain issues up the corporate chain.
These key factors have caused a decline in aggressive corporate tax promotion, although Wilkins warns that such promotion is not over. Wilkins noted that promoters have shifted their strategies away from sophisticated corporate taxpayers, marketing their structures to wealthy individuals and closely held businesses. In line with this shift, Wilkins said practitioners would have to spend significant time helping such clients see through pitches from aggressive promoters.