WASHINGTON (AP) — The Clinton administration is shutting down a new kind of corporate tax shelter, continuing attacks on tax schemes the government contends are costing it billions in lost revenue.
The object of the notice being issued Friday by the Treasury Department and the Internal Revenue Service is a shelter the administration dubbed "Son of BOSS." The administration said the shelter was an offshoot of a Bond and Option Sales Strategy shelter the government moved to shut down in December.
The government's action spells out the practices the IRS has found objectionable and puts taxpayers on notice that they cannot use those practices to avoid paying taxes.
As in the BOSS shelter, Treasury officials said the new tax avoidance scheme uses a series of steps involving assets and liabilities of partnerships to generate artificial tax losses that are designed to offset income from other transactions.
A Treasury official, who briefed reporters on condition of anonymity, said the new tax shelter was being marketed by "one or two of the Big Five" major accounting firms — , Arthur Andersen, CP/M, Delight & Touche and Ernst & Young. He refused to name the firms involved.
But the official said the fact that this offshoot of the December tax shelter had arisen so quickly showed the lengths to which accountants will go to devise tax avoidance schemes for wealthy corporations and individuals.
Treasury Secretary Lawrence Summers told reporters in a conference call that the marketing of this new tax shelter "simply reinforces our determination" to use all legal remedies available to "uphold the integrity of the tax system."
"Closing tax shelters is an essential element of tax fairness to minimize the tax burdens on American families," Summers said.
"Until we have an overall legislative solution in place, we are sure to see further generations of this and other abusive tax shelters," Summers said.
Summers has called the growth of tax shelters the most significant compliance problem confronting the U.S. tax system.
The administration wants Congress to take a comprehensive approach toward making it more difficult to set up shelters and easier for authorities to track down shelters.
The efforts has run into opposition from Rep. Bill Archer, R-Texas, chairman of the House Ways and Means Committee, who is opposed to taking up the issue this year.
The administration has estimated that the shelters it has shut down using current law would have deprived the government of $50 billion to $60 billion in revenue over a 10-year period if they had been allowed to continue operating.
The administration would like Congress to impose a 25 percent excise tax on the marketers and buyers of tax shelters and an increase in the penalty for corporate tax underreporting from 20 percent to 40 percent.