WASHINGTON, Feb. 13 (UPI) — Democrats and Republicans Thursday said a new report showing how Enron “outmaneuvered” the Internal Revenue Service would drive into law new reforms to shut down tricky corporate tax schemes.
“Let me be clear: Today, February the 13th, 2002, will be the effective date for any legislation that we offer to shut down these tax schemes or anything like them,” Senate Finance Committee Chairman Chuck Grassley, R-Iowa, said about the date his committee received the report.
“I don’t care if it takes us five years to get the legislation passed, the date will hold. So to all you lobbyists sitting out in the crowd today, write it down.”
After a year of investigating, Congress’s Joint Committee on Taxation prepared the 723-page report showing how Enron paid no income taxes from 1996-1999 and only $63 million from 2000-2001.
“Enron not only engaged in accounting gimmicks to boost stock prices — but Enron repeatedly abused the tax code,” said committee Ranking Member Sen. Max Baucus, D-Mont. “The IRS was kept in the dark and outmaneuvered,” he said. “I look forward to working … to develop additional legislation based on the report.”
The report shows how Enron’s tax arrangements saved the company $2 billion from 1995-2001. The report includes tax return information, opinion letters from law firms on the tax handling of transactions, internal documents and accounting firm correspondence. It focuses on Enron’s use of tax shelter arrangements, offshore entities, and special purpose entities and the compensation arrangements of Enron employees.
It recommends that Congress take a series of steps to crack down on unscrupulous behavior:
— A new law should “discourage” business transactions designed solely to minimize taxes;
— Employees, consultants and advisers should not be allowed to become partners in business transactions designed to minimize or avoid taxes;
— The IRS should have an arsenal of sanctions to use against tax advisers who know, or have a reason to believe, that the tax claims made by a company might not be accurate; and
—Accounting rules should be reconfigured to better reflect the company’s tax burden.
The committee also recommends that Congress take action to ensure that publication of the Enron report does not become a tax guide for companies to cheat taxpayers.
“The report is a call to act and we will act,” said Senate Minority Leader Tom Daschle, D-S.D.
In February 2002, Baucus and Grassley asked the committee to conduct the review of Enron’s activities.