SEC, IRS May Seek Tax Data Disclosure
Stock regulators and the IRS are exploring the idea of requiring companies to publicly release more tax information, the head of the Securities and Exchange Commission said Monday.
SEC Chairman Christopher Cox said he discussed the subject over lunch recently with Mark Everson, commissioner of the Internal Revenue Service. Cox stressed that the idea was not a formal proposal.
Cox mentioned the possibility of requiring additional tax disclosures at the close of his remarks at the annual meeting of the Society of American Business Editors and Writers here.
He and Everson “recently had lunch to discuss in part whether or not side-by-side presentation of tax reporting and financial reporting would be beneficial for investors.”
Corporate watchdogs have long been suspicious of the gap between what companies report to the SEC and what they report to the IRS. Companies are under pressure to maximize the earnings they report to shareholders while minimizing earnings they report to the tax agency.
Cox said that in any proposal for more disclosure, “we want to make sure that whatever we do in this respect adds clarity and doesn’t just add a lot more facts and details that create a problem.”
But taxpayer advocates worry about any move away from the privacy of tax returns, even for corporations.
“That would be one of the most radical departures in tax history,” said Pete Sepp, spokesman for the National Taxpayers Union. “It could start us down a very dangerous path.”
Tax-return information “is often regarded as among the most private in American society,” he said.
Everson floated the idea of making corporate tax returns public during a March 14 speech at the National Press Club.
“There are important public policy arguments to be made in favor of maintaining the privacy of corporate returns,” Everson said then. “Nevertheless, making corporate tax returns or a portion thereof public would likely improve compliance. I believe this idea merits debate.”
Separately Monday, Cox reiterated that the SEC would subpoena journalists only as a last resort in the agency’s enforcement actions.
In April, the SEC decided that journalists would only rarely be subpoenaed for information in the agency’s probes. Instead, the SEC would seek essential information from other sources before issuing such subpoenas.
Asked whether just one subpoena could have a chilling effect on the work of reporters, Cox said, “Of course.” But the SEC “will not always be able to guarantee that journalists will be hermetically sealed from their responsibility as citizens,” he said.
The SEC adopted the policy after two Dow Jones & Co. columnists were subpoenaed in February as part of an investigation involving retailer Overstock.com Inc.
Cox later rebuked the agency’s staff for issuing those subpoenas.
