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The Honorable Douglas H. Shulman June 1, 2010 Page 2 of 3

  • Disproportionately impacts small businesses; and

  • Calls for taxpayer reporting at a higher level than mandated by Congress.

We understand that the UTP proposal does not change the underlying rules for financial reporting, but believe overlaying a tax disclosure construct on the financial reporting system

introduces a dynamic which could work at purpose of the financial reporting rules. reporting should not be compromised as part

cross purposes with the original and fundamental The importance of reliable, transparent financial of this IRS tax disclosure initiative.

Based on the foregoing concerns, rather than mandating a new disclosure regime – with all the problems inherent in the current design – we strongly urge the IRS to focus its immediate attention and resources on dramatically improving its use and management of the significant amount of disclosed information it already possesses. Before being required to provide a substantial amount of new information, taxpayers should be confident that the IRS will be at

least as diligent in analyzing and utilizing reporting it. We therefore suggest that the

the disclosed UTP proposal

data as taxpayers are in developing and be withdrawn or substantially revised.

Nevertheless, given the recent comments by IRS officials regarding the Service’s apparent commitment to implementing the UTP initiative, our attached comments provide constructive responses to the questions raised by Announcements 2010-9 and 2010-17 in the spirit of striving to help the Service achieve a reduction in taxpayer burden and craft a workable UTP program.

From that perspective, the AICPA recommends that the IRS pilot the proposed UTP program and reserve judgment about its expansion until it has the opportunity to thoroughly evaluate both the intended and unintended consequences of the new process on the larger taxpayer community. Further, because the disclosure regime will have a disproportionate impact on small businesses, we believe the $10 million asset threshold should be significantly elevated. We recommend that a conjunctive test, under which only taxpayers that have total assets in excess of $50 million and annual gross receipts in excess of $100 million, be subject to the UTP reporting requirement.

With respect to a very significant issue that we discuss in both the policy section of our comments and under question 2 of Announcement 2010-17, we recommend (as a broad principle) that pass-through entities and tax-exempt entities should not be subject to any uncertain tax position disclosure regime, as such entities are generally not subject to federal income taxation. In this context, we note with approval the general exclusion of pass-through and tax-exempt entities from the requirement to file a Schedule UTP for 2010 tax years. We believe the associated compliance burdens on these entities would outweigh the relative benefits of such potential disclosure and thus, we urge the permanent exclusion of pass-thorough and tax- exempt entities from any future UTP filing requirement.

In summary, we clearly support the overarching goals of certainty, consistency and efficiency,

but believe of burden,

the proposed disclosure regime has the very distinct complexity and uncertainty which will outweigh

potential of injecting a the projected benefits.

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