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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 believe the associated compliance burdens on these entities would outweigh the relative benefits of such potential disclosure.

We also recognize that tax-exempt organizations could have an uncertain tax position to the extent the entity has unrelated business taxable income. Nevertheless, it is unclear how a tax- exempt entity should handle the situation when the organization is taking the position that an item is not unrelated business income and Form 990-T (Exempt Organization Business Income Tax Return) is not required to be filed. Under these circumstances, disclosure is currently being made on Form 990, Schedule D, Supplemental Financial Statements. Also, certain items for exempt organizations are based on reasonable estimates, such as overhead and Form 990-T expense allocations. We believe the IRS should include a standard of reasonableness, under which disclosure would not be required for items that represent reasonable estimates derived by the tax-exempt entity.

Pass-Through Entities. We also note with approval the exclusion of pass-though entities from the requirement to file a Schedule UTP for the 2010 tax year and urge the permanent exclusion of these entities from the filing requirement. These entities generally are not subject to federal income tax, and we believe the associated compliance burdens outweigh the relative benefits of potential disclosure. For example, because partnerships and most S corporations do not pay U.S. income tax, and in many instances the preparers of these returns will not know each owner’s U.S. income tax rate, the pass-through entity would generally not be in the position to report an uncertain tax position’s potential income tax effect. We recognize that pass-through entities (particularly partnerships) could have corporate partners or other partners/owners who may be required to conduct a FIN 48 analysis, and would support the requirement that such entities report to their affected partners the information required for those partners to fulfill their UTP reporting responsibilities on their returns.

If, notwithstanding our recommendation above, partnerships are included in the uncertain tax position disclosure regime, then it is critical that the IRS implement procedures enabling partnerships to timely report any uncertain tax positions to the partners, thereby ensuring that the partners are potentially able to report such positions timely on their tax returns.

We think it is unwise for the IRS, without a change in law or regulation, to set the disclosure bar for a filing position for tax purposes at a higher level than enacted by Congress. Requirements for the disclosure of tax return positions already exist.

The Internal Revenue Code (IRC) generally requires disclosure of tax return positions in those circumstances when the taxpayer does not have “substantial authority” for the position. Specifically, section 6662 imposes a 20 percent penalty on any portion of a taxpayer’s underpayment of tax attributable to any substantial understatement of tax due to negligence,

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