WHEN THE Financial Accounting Standards Board, the accounting industry’s quasi-public regulator, issued Financial Interpretation No. 48 at the beginning of this year, corporate tax specialists knew their work would soon be drawing more scrutiny. By requiring companies to calculate and disclose how much they estimate they would owe in back taxes and penalties if the government challenged their shakiest tax positions, the rule forces corporate accountants to reveal to investors what amounts to a rough sketch of how aggressively they claimed tax benefits.
But what tax accountants and attorneys didn’t expect was to have Senate investigators on their case, as well. During Washington’s late-August slump, the Senate Permanent Subcommittee on Investigations, headed by Carl Levin, D-Mich., mailed letters to dozens of blue-chip companies seeking information on how they were calculating their FIN 48 disclosures. The letters amounted to asking companies to explain specific tax shelters that they estimate face worse-than-even odds of holding up to an Internal Revenue Service challenge.
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