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Washington Policy Conference
Presented by Financial Executives International – Sept. 20-21, 2010,
Washington Court Hotel, Washington, D.C.
FEI Summary
Financial Executive’s editor-in-chief attended the day-long conference and has distilled some key points from several of the sessions. To be sure, this is only a small part of what those who attended the conference were part of.
What better place to hold a conference on Washington policy than in the seat of our nation’s power – Washington, D.C.? The day-long conference, which began with a reception and speaker on Monday evening, Sept. 20, consisted of five cram-packed sessions with moderators and speakers – from policymakers, to those who craft bills and consult with congressional committees to representatives from brand-name U.S. companies – discussing some of the most pressing issues for business and sharing ideas of what’s ahead.
Major themes of the conference were U.S. competitiveness, uncertainty and the need for government leadership to make the tough decisions.
FEI’s President and CEO Marie Hollein opened the conference saying: “We at FEI felt that it was important to create a forum at this time to impart insights on key fiscal and economic policies, provide legislative and regulartory updates and explore the various perspectives on tax reform. Tonight and tomorrow we are bringing together key business and government leaders to provide these insights for you, senior-level financial executives.“
She introduced Kate Barton, the Americas vice chair - Tax Services for Ernst & Young LLP, to comment and introduce the evening’s presenter, U.S. Securities and Exchange Commissioner Kathleen Casey, who spoke about the SEC’s current agenda priorities and took questions from the FEI members in attendance. E&Y was a platinum sponsor of the event.
Barton said she was pleased for the honor of introducing Commissioner Casey "just as Congress has returned and as the SEC once again addresses a number of important pending financial regulatory issues." Many of the issues, she added "have a direct impact for all of us as financial professionals. We're seeing that all across the spectrum, including in my area, taxes.
"But whether it's taxes ... or reporting ... or any other financial area ... what's occuring today in the area of government policy is echoing in the boardroom and the C-suite as never before. Everyone is watching what's happening here in Washington, especially as we continue to grapple with an uncertain economy."
Tues., Sept. 21
Hollein opened the Tuesday morning session saying: “I don’t have to tell this audience how important it is to know about the subjects we will be covering in today’s program. Right down the road, Congress had enacted the most sweeping legislation the nation has seen in generations. It’s currently still deliberating on dozens of other major policy initiatives – and we’re literally days away from hotly-contested midterm elections that could tip the balance of power in our nation’s capitol.
”We are pleased at this forum to bring together key business and government leaders to provide these insights for you --- the senior-level financial executives.“
She introduced the first speaker, the 47th Commissioner of the Internal Revenue Service, Douglas H. Shulman, who presides over the nation's tax system, which collects approximately $2.4 trillion in tax revenue that funds most government operations and public services. The IRS employs about 100,000 and has a budget of more than $12 billion.
Commissioner Douglas H. Shulman
Shulman spoke of initiatives under his watch, including a move to shift the relationship between the IRS and corporate taxpayers to be nonadversarial and cooperative. “We share a lot in common and desire similar outcomes, certainty and efficiency,” he said.
Among the IRS’s many programs, a few of those he highlighted are the Compliance Assurance Program (CAP), expanding the industry resolution process, fast-track appeals and issues related to international and offshore efforts.
Shulman characterized himself as a “big believer that institutions and individuals should strive to get better,” and said he’s also “a believer in open and honest dialogue.” The agency, he said, is “trying to evolve, listen to feedback, not stand still and improve its systems” to work with companies.”
In the session Facilitating American Competitiveness Through Tax Reform, Moderator Eric Solomon, director, National Tax Department of Ernst and Young (and a former assistant secretary for Tax Policy at the U.S. Treasury Department), framed the discussion characterizing the background of the U.S. tax system as “patchwork, developed over decades and adding complexity and tax unevenly across industries.” As capital and corporations move around the globe and the role of the U.S. and the economy changes and foreign competition changes, he proposed redesigning the tax system and asked “What is the purpose of the U.S. tax code?”
Solomon stressed that any changes should incorporate a look at all taxes – not just business taxes -- but individual taxes, since many businesses are formed as limited liability corporations (LLCs); other taxes should be considered as well.
Panel member Ron Dickel, vice president of Finance and director of Global Tax and Trade for Intel Corp., said that “It’s all about competitiveness.” Intel, he said, a U.S.-based company with “over 75 percent of its customers abroad and three-quarters of its manufacturing base in the U.S., is finding it difficult to compete with foreign competitors.”
The Hon. James O. McCrery Third, partner, Capital Counsel LLC, said we “need to modernize our system and not just color within the lines.” He’s recommending looking at not just revenue, but spending, and doesn’t favor any new tax “without serious entitlement reform.”
McCrery would like to “create a modern tax system that is more competitive,” to maintain the U.S.’s place in the world.”
The luncheon speaker, David M. Walker, president and CEO of the Peter G. Peterson Foundation, brought a bit of hopefulness – and levity – to the morning sessions that had focused on the grim problems for corporate America of the deficits, taxes, costs for health care, etc. Walker is the subject of the cover story of Financial Executive magazine’s September issue.
Walker began by pointing to two pins on his lapel – one for his roots as a son of the Revolution and one signifying his CPA designation – and described himself as “a patriot who can add,” something in Washington, he added, that’s a rare breed!
Indeed, he said, the new four-letter word in the nation’s capital is “math.”
Walker outlined the threats to our “ship of state:” The large and growing structural deficits, rising health-care costs (recent reform didn’t do it) and more, that are driven by “tens of trillions of unfunded obligations (primarily Medicare and Social Security).
The U.S. fiscal policy, he said, “is on an uncertain path. Government has grown too big, waited too long and spent too much to solve [the deficit problems] on the spending side only.” The math, he says “doesn’t work.” Three quick fixes he advocates are to 1. Reimpose [stricter] statutory pay as-you-go rules in Congress; 2. Reimpose discretionary spending caps; and 3. Reconsider every major mandatory tax and spending program every three years (the current 68 percent of the programs on auto-pilot is simply too much).
Walker urged major business and professional associations [like FEI] to get involved to get the message to Washington en masse.
In the Energy: Strategies, Policy & Best Practices for American Business session, moderator Joseph S. Hezir, co-founder and managing partner, EOP Group Inc., outlined some of the issues companies need to be cognizant of pertaining to their energy use and factors that they may need to comply with. Among these: Greenhouse gas – U.S. emissions [amount] flat over the past five years, whereas emissions from the rest of the world increased by more than 10 percent (led by China); uncertainty over U.S. climate change policy affecting investment decisions; stress on coal electricity generating flat; growth prospects for clean energy technology; long-term nuclear energy policy; moving toward a tipping point in petroleum markets; continuing public demand for a clean environment.
From l to r: Joseph S. Hezir, Matthew P. Haskins, Moses Boyd, Paul Baily
Paul Baily, senior vice president, Federal Affairs, American Coalition for Clean Coal Electricity, said he “predicts gridlock in D.C., after the midterm elections.” He indicated the 2005 climate bill was 150 pages, whereas the latest bill is more than 1,000 pages. “It gets very complicated.”
He also predicted that climate change legislation is dead until 2013, if then, and added he thought it was a “slam-dunk a few years ago.”
Matthew P. Haskins, principal, NTS, PricewaterhouseCoopers LLP, discussed current enery-related issues driving C-suite decisions. Among those: Voluntary emissions reporting by companies, SEC interpretive guidance about how to disclose climate change in financial reports and tax opportunities (a “year-end land rush to get solar projects done and energy efficiency retrofits”).
Carbon data, he says, “is becoming financial data,” as companies migrate such data into their financial reports.
In the final session of the day, moderated by Bernie McSherry, senior vice president of Strategic Initiatives, Cuttone & Co., four executives from U.S. companies talked about Policy Today and its Impact on American Business.
James Shea, vice president and chief Tax Officer of Prudential Financial said the “uncertainty is huge for our business model.” As a seller of long-term insurance products, he indicated it’s difficult trying to predict the tax system 20 years out or even two years out.
From l to r: James Shea, Donald F. Robillard Jr., Susan Stalnecker
He added: “Where we sit today is in a completely defensive mode – [trying] to improve the tax [picture] and thirsting for revenue, trying to keep in mind we’re building a system for a long time that is getting more competitive.”
Donald F. Robillard Jr., senior vice president and chief financial officer of Hunt Consolidated Inc., a private company, said “unintended consequences are giving us some level of uncertainty and [questions as to] how much is this going to cost us?” When private companies are mentioned [in regulations, etc.], he said, “One size does not fit all.” Bottom line, Robillard says: “We’re optimistic.”
On reinstating the research and development tax credit, Taylor Hawes, chief financial officer, Intellectual Property & Licensing, Microsoft Corp., indicated the “tech sector spent $41 billion in R&D last year, which is 7 percent of its revenue. A majority of that added to the sector’s 37 percent surplus in the U.S.
Hawes would like to see tax reform and said “clarity over what’s going to happy is super-important,” as is uncertainty on policies that define competition with countries like China and India. On health care, he noted that Microsoft has a “Cadillac” plan that it uses to retain employees and indicated companies need to be “pragmatic and make changes” as necessary. He also favors the technology use of maintaining medical records and bank and financial records as an opportunity for efficiency and transparency.
On the economy over the next few years, Susan Stalnecker, vice president, Finance and treasurer, E.I. DuPont de Nemours and Co., said she thinks “we’re coming out of it” and that “government, legislation and regulation can influence that if they keep on the path they’ve been on the past years.”
Stalnecker added, “It’s a reality, we’re going to have to spend more time with regulators, understand them, get engaged and deal with it.” DuPont, she noted, has refreshed its D.C., office.
-- prepared by Ellen M. Heffes
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