WASHINGTON, D.C.—U.S. Representative Rahm Emanuel (D-IL) recently introduced H.R. 3650, the Taxpayer Shelter and Transparency Enforcement Act, a bill to strengthen tax shelter disclosure requirements, and establish penalties against those who do not comply.  Companion legislation was introduced by Senators Charles Grassley (R-IA) and Max Baucus (D-MT).  This bill is the latest initiative by Emanuel to crack down on corporate welfare.

Many of the nation’s corporate scandals, such as the collapse of the Enron Corporation, resulted in lost jobs, diminished pension savings, and a weakened economy.  Much of this resulted from unethical, and in many cases, illegal marketing of tax shelters designed to allow certain companies and individuals to avoid paying their fair share of taxes.  A recent study commissioned by the IRS estimated that tax shelters alone cost taxpayers from $14 billion to $18 billion each year.

“It’s time for us to stop rewarding low ethics with high returns,” said Emanuel.  “When we turn a blind eye towards questionable practices, we increase the burden on the everyday, law abiding taxpayer.  We need to establish and enforce clear lines of right and wrong.”

Substantial penalties are required to ensure the integrity of these regulations.  An editorial in 12/4 Washington Post refers to the current $1,000 penalty for promoting abusive tax shelters as “laughable.”  The editorial contends that, “Some of the leading tax firms may – emphasis on the ‘may’ – be cleaning up their acts, but other operations will fill the void as long as the business remains so lucrative and the risk so low.”

Tax shelters remain widespread and are not new.  Congress still needs to pass legislation to shut down abusive tax shelters used by Enron, WorldCom and Tyco.  The proliferation of tax shelters damages the overall tax system by placing a greater burden on those Americans and corporations who are honestly and patriotically paying their fair share.  These shelters also undermine public confidence in the tax code.

The Taxpayer Shelter and Transparency Enforcement Act provides the fairness and accountability in the enforcement of the regulations.  It strengthens disclosure requirements by requiring tax advisors to keep records on tax shelters and foreign financial accounts as well as investors to whom they market tax shelters, increases penalties for frivolous tax submissions, and emphasizes accountability by requiring CEOs to sign company tax returns.

Congressman Emanuel introduced The Taxpayer Shelter and Transparency Enforcement Act on Tuesday, November 24, 2003, during the House session.  The bill was subsequently referred to the Committee on Ways and Means for further consideration.

“We must act before the next scandals come,” said Emanuel.  “We can’t ignore $18 billion worth of loopholes any longer.”