The Tax Shelter Disclosure Act: the next battle in the tax shelter war

On August 2, 2001, Chairman Max Baucus and ranking minority member Charles E. Grassley released draft legislation in the Senate Finance Committee intended to strengthen the Internal Revenue Service's weaponry in the continued battle against abusive tax shelters. The draft legislation, cited as the "Tax Shelter Disclosure Act", would amend the Internal Revenue Code of 1986 in several significant ways. Two of the main provisions of the draft TSDA defined what constitutes a "tax shelter" and raise the penalties associated with tax shelters. While it appears that the events of September 11, 2001, may have slowed the progress of the draft TSDA, the Enron bankruptcy and the growing budget deficit appear to have moved the draft TSDA back to the front burner of the Senate Finance Committee. Consequently, the time is ripe to synthesize the draft TSDA with the related commentary so as to solve the abusive tax shelter problem without creating an unworkable system of new rules, regulations, and penalties.