In a letter to board Chairman William J. McDonough, Sen. Carl M. Levin (Mich.), the ranking Democrat on the investigations subcommittee, predicted the rules "would help . . . rein in abusive practices within the U.S. tax shelter industry."
But Sarbanes-Oxley had another, perhaps more important impact, Shackelford said. By the 1990s, corporate auditing had become so pro forma that it lost virtually all its profitability for the major accounting firms. They turned to higher "valued-added" efforts, such as consulting and tax shelters, to boost their bottom lines.
| | | | _____ Tax Center _____  Memorable Changes Many of this year's changes involve minor adjustments. But for taxpayers affected, they can be well worth knowing about.
Numbers Crunch It's clear that taxpayers who don't use professionals to prepare their returns need to have up-to-date guides and/or software.
_____ Featured Columnists _____  A Big Refund Isn't Great Michelle Singletary writes that come tax time, it's better not to receive a refund.
_____ Live Discussion _____ Transcript: Michelle Singletary and Jim Dupree of the IRS
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The plethora of new accounting regulations and penalties codified in Sarbanes-Oxley have once again made auditing a highly profitable business, Shackelford said. Not only do the big firms not need the money from their shelter business, they do not want to "slay the goose laying the golden egg" by jeopardizing their audit business with negative attention from the IRS, Shackelford said.
"They're walking the straight and narrow right now," he said.
The Son of Boss settlement, in which nearly 1,200 shelter customers came clean, also shows that the IRS is capable of settling a massive number of cases equitably, without having to litigate large numbers of them, said David A. Weisbach, a tax law professor at the University of Chicago. Now, Weisbach said, the IRS must apply the lessons of Son of Boss to the thousands of off-shore credit card accounts it is targeting.
In the credit card schemes, individuals funnel pretax income to bank accounts in offshore tax havens, where the balance remains tax-free. The account owners then use credit cards to live off their accounts. Those accounts are so plentiful that they would tie the court system up for years without a similar mass settlement.
But Cohen said the Son of Boss success does carry risks. That shelter was so clearly abusive that the IRS could establish a one-size-fits-all settlement and issue an ultimatum that Son of Boss clients had little choice but to take. But shelters that are closer to the line of legitimacy will take more manpower and more money to police, he added.
In recent years, neither the Bush administration nor Congress has been willing to make that kind of budgetary commitment, Cohen said.
