The AICPA’s reaction was generally favorable to the rule proposed by the Public Company Accounting Oversight Board concerning tax services that can be offered to public company audit clients, but the Institute will submit a comment letter.

Four circumstances are identified in the proposal that would be considered as impairing an auditor’s independence. They are entering into contingent fee arrangements with the client, providing services related to planning or opining on the tax

consequences of a transaction that the Treasury Department has said is a listed or confidential transaction, providing "aggressive tax planning" or providing tax services to officers in a financial reporting oversight role of an audit client.

"Aggressive tax planning" is defined to be any planning or opinion that meets of all the following four tests: (1) the audit firm provides any service related to the plan or opinion; (2) the idea was not initiated by the client; (3) a significant purpose of the idea was to avoid taxes; and (4) the plan has a less than 50-50 chance of prevailing if challenged by the Internal Revenue Service.

Some who have reviewed the proposal have expressed two concerns with these tests: the words "any service" in number 1 and "significant purpose" in number 3. If read broadly, "any service" could be construed to be the mere preparation of a tax return if it included the aggressive tax idea, even though the idea was promoted to the client by an unrelated third party. For item number 3, it would be preferable to use the term "principal" purpose rather than "significant" purpose. After all, virtually any tax suggestion would have as one of its significant purposes the avoidance of taxes.

Services that would be allowed under the proposal include routine tax return preparation and tax compliance, general tax planning and advice, international assignment tax services, and employee personal tax services.

A copy of the proposed rule is on the PCAOB’s Web site.