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Should Universities be forced to spend a certain amount of their endowments? Grassley says yes

Many universities, especially the top research universities in the country, have large endowments that have grown by double digits over the last few years.  Yale's endowment has gained 28% so far in 2007, growing to a staggering $22.5 billion dollars, against an average for endowments of over $1 billion of about 18%.  At the same time, Yale's tuition has increased exponentially--undergraduates pay about $45,000 annually, an increase of 4.5% this year.  Tuition has increased 49% over the last decade, even while Yale's endowment has increased 300%.  See Thomas Kaplan, Senator Proposes Mandating Greater Use of Endowments, Yale Daily News, Oct. 19, 2007.

At hearings in the Senate Finance Committee last month, two witnesses suggested that Congress should mandate a minimum expenditure from endowments of tax exempt organizations like Yale to parallel the required expenditures by private foundations.  See JJ Hermes, Senators Weigh Idea of Requiring Payout Rates for Large University Endowments, Chronicle of Higher Education, Sept. 27, 2007.  Lynne Munson said that the wealth of these universities is being "hoarded" rather than being used to offset tuition increases with financial aid.  Kaplan, op. cit.  Jane Gravelle of the Congressional Research Service informed Congress that universities with endowments could increase spending from the endowment by just one-tenth of one percent and completely eliminate the need for tuition increases. Hermes, op.cit.  She based her statement on a report for the Congressional Research Service, available here.   Institutions with endowments over $1 billion had an average return of more than 15% but average payout rates of less than 5%.  id.  A few institutions reap the most benefit from the tax-exemption for endowment incomes--a benefit that exceeds the annual cost of the charitable contribution deduction.  Id. 

Senator Grassley thinks the 5% required spending proposal belongs on the table as part of any higher education legislation this year.

The proposal isn't new.  See David Kirkpatrick, College/University Endowments: How High is Up?, EdNews.org, Oct. 25, 2007 (noting that there were only 17 universities with endowments of more than $1 billion a decade ago, and now there are more than 60; Harvard's was only about $18 billion when a proposal for mandatory spending was introduced and now is about $35 billion).   the Kirkpatrick article explains that Harvard could provide a free undergraduate education to every single one of its undergraduates indefinitely--the $300 million it would cost annually is less than the $700 million a month the endowment earned in 2006.

Universities with big endowments have not taken kindly to the proposal.  Princeton, Harvard, Brown and others have objected that they should not be required to spend more than they determine is wise, since they need to develop cushions to protect from the vagaries of the economy.  The American Council on Education, a lobbying coalition of research universities, protested that the federal government should not get involved in regulating how universities determine their budgets. 

Of course the universities like their educational endowments' tax exempt status (also provided by the federal government) that allows them to accumulate big gains without taxation.   And they increasingly reap the benefit of investments in nontaxed offshore hedge funds. 

Hedge-fund investments are tax-free for nonprofit organizations, unless endowment managers use debt-financed assets to increase return rates, a common practice. To avoid taxes, many colleges invest debt-leveraged hedge funds in overseas tax shelters.  See Paul Fain, Colleges' Offshore Hedge Fund Investments Draw Senate Scrutiny, Chronicle of Higher Education, May 10, 2007.

Cheney's Attack on Rangel Plan

Dick Cheney doesn't want the Democrats to tax wealthy people more and middle income people less.  As the New York Times reported on Saturday, he joins a "chorus of Republican opposition" to overhauling the tax code to undo the preference for the rich built into the amendments made over the last six years.  See Steven Lee Myers, Cheney Attacks Democratic Plan to Revamp Tax Code, NY Times, Oct. 27, 2007.

In spite of the fact that the Rangel plan is designed to be revenue-neutral, Republicans choose to characterize it as "the mother of all tax hikes."  I suppose that is because their focus is on the people at the very top of the income distribution curve who will pay somewhat more taxes than they currently do, because of the proposed 4-4.6% surcharge on their income.  The Rangel plan, of course, would eliminate the AMT for all taxpayers and provide tax reductions for married couples with annual incomes below $200,000.  So more folks would get a tax cut than would get a tax increase, in that revenue-neutral plan. 

It is discouraging that politicians engage in such  rhetoric rather than discussing the real issues.  How are we to afford all of the expensive spending that the Bush administration has undertaken?  The New York Times had an article today showing that George W. Bush is the biggest spender of history:  those multiple wars and the weaponry used in them cost an awful lot of money.  We pay private companies a lot more than we pay our own soldiers to do our dirty war work for us.  And health care is going to be a bigger and bigger item for Americans in the future, as our population ages.  It is simply irresponsible to adopt cutting taxes as the answer to everything.  Americans are more sensible than the politicians give them credit for being. 

That brings up the other silly item in this report of Cheney's interview.  Cheney credited the Bush revenue reductions with "driving this economy."  It doesn't seem to occur to Cheney that what drives an economy are the real productivity of its people and the real output of its businesses.  It is highly unlikely that the tax breaks enacted primarily for the benefit of the wealthy have added to that productivity and output--it is just as likely, it seems, that the money saved has been  shifted to offshore trusts or foreign equities where it doesn't help the US economy.  Tax cuts no more drive an economy than the cowcatcher drives the train.

In fact, there is considerable support for the assumption that lowering taxes on middle and lower income people, and adding a refundable dredit for workers at the bottom of the economy, do make a difference to overall economic growth.  People at the lower end of the income distribution do consume more when their taxes go down and certainly when they receive a refundable "demigrant". That increased consumption supports businesses and reves up the economy.  So the Rangel plan should be a better driver of the economy than the Cheney-Bush plan with all the tax breaks for the capital gains and dividends of those at the top. 

More on the Rangel Tax Reform Bill carried interest revenue raiser

The text of the Rangel bill proposing major changes in individual and corporate tax provisions is now available.  Download rangel_tax_reform_act_oct_2007.pdf

The Joint Committee on Taxation (JCT) has estimated that the carried interest revenue raiser--requiring hedge and private equity fund managers to pay ordinary income rates on their share of fund profits rather than capital gains rates--would raise $25.7 billion over 10 years.  Lobbyists for private equity are trying to counter the fairness arguments by asserting that it is unfair to give capital gains rates only to those who have invested capital in these private investment deals, rather than to those whose "sweat equity" makes the investments pay off. 

Their argument, of course, cuts another way.  If it isn't fair for investors to pay taxes at the preferential rate when managers of the funds have to pay taxes at the ordinary rate applicable to compensation, then how can it be fair to let any capital investor get the capital gains rate while the workers in the enterprise, who make it work, must pay the nonpreferential ordinary income rates on their salaries. 

Of course, the lobbyists think that Congress will never undo the preference for capital gains.  It tried back in the 1986 reform, and the influential owners of capital were able to make the provision disappear in almost no time at all.   So probably they think their use of this argument will just call up all the resistance to correcting the preference for capital gains, and the investment fund managers can be allowed to continue with their cushy deal.

   But the argument of "let us have our compensation at the capital gains rate, in spite of the fact that other types of workers have to pay ordinary income rates, because we have been getting that preferential treatment under the old rules" is clearly not a fairness argument, no matter how lobbyists try to clothe it as such.

Tax Reform in the 21st Century--Rangel Bill To Be Revealed 10/25

The BNA RealTime for Oct. 24 scopes out the Rangel proposal, "The Tax Reduction and Reform Act of 2007"  that will repeal the AMT and lower the statutory corporate tax rate, based on information BNA has gathered from lobbyists, staffers, and legislators.  The following summarizes the information in that report.

The AMT (an alterative tax system that, when applicable, taxes a broader base of income than the regular tax sytem, but at a lower rate than the top marginal rate under the regular tax system)  would be repealed.  In its stead, a new surtax would be enacted on capital gain and dividend income (currently taxed at highly preferential rates) of high-income taxpayers.  The surtax would be somewhat progressive  (starting at 4%  and rising to 4.6%).  It  would apply only in the case of taxpayers with adjusted gross incomes of more than $200,000 (joint returns) or $150,000 (single returns).  That means it won't hit little guys at all, which is good.  The top rate for the surtax would be reached for those with AGIs of half a million. 

The lowering of the statutory corporate rate, to just over 30%, would be paid for in part by repealing a few breaks that complicate the Code mightily without making any sense from a policy perspective--the Section 199 manufacturing deduction added to the law when Congress repealed the exporter tax break and LIFO (last in first out) accounting.  The manufacturing deduction was written into the Code when Congress eliminated the tax break for exporters under international pressure, showing that Congress didn't know how to take advantage of a reasonable situation to eliminate a bad subsidy without enacting another bad one.  LIFO accounting has been around for much too long as a taxpayer-favorable accounting mechanism that doesn't make economic sense--there have been attempts to behead the LIFO monster before, so we'll see how far this one will go.   BNA says a third source of revenue would be deferring the benefit of some deductions for controlled foreign corporations until the related income is repatriated.  Eliminating deferral altogether would make more sense (and relieve the Code of lots of complications), but that's a step in the right direction. 

Instead of the big bill, Congress will have the option to pass a little AMT patch and one year extension for all of the Bush expiring provisions.   It is likely that a majority of Congress sees the AMT patch as a must-do provision, so that makes the revenue raisers to offset the high cost more interesting.  Levin's bill on the taxation of carried interest income is a likely candidate, and the need to pass the AMT provision may be the jolt necessary to get Congresspersons who are currently on the fence on the carried interest provision to jump off on one side or the other.  According to BNA, another revenue raiser will be taxation of offshore arrangements for deferred compensation.

Testing taxpayer involvement in writing regs: if there is a right place to start, it isn't REMICs

Notice 2007-17 announced a controversial IRS program to allow regulated parties to write the regulations that govern their activities along with policy memorandums explaining their rationales.  IRS According to the BNA RealTime of 10/23/07, Commissioner Korb defended this proposal today at the Tax Executives Institute, indicating that it would get guidance to taxpayers faster than the IRS can otherwise do, especially in highly technical areas where taxpayers have considerable expertise.

Of course, that is just the problem with the proposal.  The wolves will be guarding the henhouse.  Korb's first go at the controversial mechanism for writing regulations is issuance, slated for October 29th, of proposed new regulations to permit REMICs to become more active financial vehicles able to modify commercial mortgage loans in the conduits in ways beyond those permitted now under the tightly restrained REMIC regulations. 

Here's the problem with this proposal.  First, there are very few tax lawyers in the country who even know what REMICs are (real estate mortgage investment conduits), much less understand the restrictions set out in the Code and regulations governing the kinds of interests that REMICs are permitted to issue without becoming subject to a corporate tax.  Very few tax lawyers are able to recognize whether and how a REMIC sponsor may be "playing" the system--whether in underdetermining the amount a REMIC residual holder is required to take into income, writing into mortgage loans swaps and other features that are not permitted to be entered into directly by the REMIC, or creating new classes of interests issued by a REMIC that may well result in the REMIC holding assets it is not permitted to hold or issuing interests it is not permitted to issue.  That means that the practitioner community that can comment knowledgeably on regulations is very limited, and it means that the IRS has limited expertise to draw on in its own behalf.

Second, because the IRS is suggesting this procedure be used most in the technical areas of the Code (such as REMICs), the tax administration will be subject to capture by the highly technical and specialized financial services industry that is most knowledgeable in this area.  This is a problem when the financial services industry is already able to game the system through innovative new derivatives and application of old rules to new financial products in ways that suit the tax-avoidance proclivities of customers rather than the revenue-generating needs of the Treasury.  While many tax lawyers do play an important public service role through their commentary as members of bar associations (the New York State Bar Association Tax Section comes to mind), this process removes the filtering role of working through a bar association, where the accepted importance of the role of lawyers in developing the law in accord with the public interest helps to restrain zealous advocate impulses on behalf of client positions.  The government's process doesn't retain those professionalism constraints. Practitioners may propose regulations that directly benefit their clients.

Third, if the practitioner community is invited to write regulations, one can expect that it will be tempting to overlook problems the practitioner community is aware of (but which the tax administration may not be aware of) that involve either overly aggressive interpretations of existing provisions or clearly abusive practices that have been undertaken by some practitioners.  In fact, the temptation will be to draft regulations in such a way as to condone practices that the practitioner community has some doubts about or wants to have blessed because it will permit more REMIC activity, whether or not it is sound policy to do so.

Fourth, with the tax administration taking a back seat in the development of the proposed regulations, it is not clear how the primary concern for the public interest will be expressed.  The current process involves a praiseworthy give-and-take, with the tax administration proposing regulations, various bar groups and private practitioners commenting, tax media discussing the pros and cons, and ultimately finalization of regulations based on consideration of the full commentary.  With practitioners writing the regulations and the tax administration stepping back to a facilitator role, there will, I think, be inadequate consideration of the public's perspective. 

All in all, the only thing favoring this procedure is the possibility of more rapid guidance.  That's too small a gain for the high price of quasi-privatization of the regulatory process.

Blackwater Security Guards: employees or independent contractors

Henry Waxman has written a letter to Erik Prince, the chair of the Blackwater company of mercenaries that has made huge profits out of the wars in Iraq and Afghanistan. See also the committee's website, here.   Prince testified in the House on October 2 about Blackwater's activities, related to the concern that the  mercenaries provided by Blackwater are essentially unaccountable, either to the Iraq government or the US government, when they do something wrong.  (For example, Iraq has accused the guards of unnecessarily killing at least 17 innocent people with indiscriminate and unprovoked gunfire in a busy square.)

Waxman had written a letter to Prince on October 19 to ask for additional information about Blackwater's ability to gain lucrative contracts in 2003 and 2004.  Prince initially claimed at the hearing that the contracts were competitively bid, but it turns out that they were not--Blackwater was a sole-source provider for the services.  Waxman asked on oct. 19 for detailed information about Blackwater's contracts, costs and profits.  Waxman also requested more information about incidents in which Blackwater pays compensation to Iraqis as a result of Blackwater actions.

The October 22 letter is much more directly focused on the question of whether Blackwater has attempted to evade taxes.  Unlike the two other major military contractors that provide security services in Iraq, Blackwater treats its security guards as independent contractors, thus avoiding withholding for wage taxes (Social Security, Medicare, Unemployment) and for federal income taxes. At the Oct. 2 hearing, Prince had answered a question about treating guards as independent contractors by asserting that it was a "model that works" and that the guards like the "flexbility" of that approach.

But, Waxman notes, it turns out that isn't quite the case.  A guard in Afghanistan questioned his status as an independent contractor, and the IRS ruled that he should have been treated as an employee.  Yet Blackwater would not satisfy its obligations until the guard signed a nondisclosure agreement that prevented the guard from information any politicians or public officials about the independent contractor claim.  The only purpose of the nondisclosure agreement, in other words, appears to have been to keep Congress uninformed of Blackwater's likely tax evasion in its treatment of its employees as contractors.  Waxman responds with appropriate disgust.

"It is deplorable that a company that depends on federal tax dollars for over 90% of its business would even contemplate forbidding an employee to report corporate wrongdoing to Congress and federal law enforcement offrcials."

Further, Waxman notes, guards that work for Blackwater are subject to Blackwater's extensive training, wear Blackwater-provided uniforms, use Blackwater-provided firearms, eat-sleep-work according to the schedule and in the places that Blackwater instructs.  It is hard to see how they would not be employees under the analysis that the tax administration has provided, which focuses on whether the person is subject to the employer's will in what is to be done and how it is to be done.  The IRS in its March 30 ruling in fact concluded that the guard who requested a ruling was an employee and not an independent contractor.  The ruling warned Blackwater that the logic of the ruling might apply to others that the firm treated as independent contractors, and that failure to comply with the reporting and withholding obligation could have serious consequences.

Waxman's letter provides a calculation prepared by his staff regarding the amount of taxes Blackwater may have avoided from May 2006 to March 2007 under one contract with the government:  "$15.5 million in Social Security and Medicare taxes, $15.8 million in federal income tax withholding, and $500,000 in unemployment taxes." Id. (footnotes omitted).  Waxman calls for a number of disclosures from Blackwater about these matters.

Cancellation of Debt Income on Mortgage Loans: CRS Study

In light of the recent House passage of H.R. 3648, providing for an exclusion for forgiven debt income on qualified residence debt cancellation, the Congressional Research Service has issued a report on various issues related to mortgage debt income exclusion. Download crs. Analysis of the Proposed Tax Exclusion for Canceled Mortgage Debt Income.Oct16.pdf   

Noting that the rationale discussed has been the concern for homeowners who are are in stress when property values decline below the debt owed on the property, leading to lenders writing down the debt or to foreclosures with sales that are not sufficient to satisfy the debt, the report points out that there are already provisions in the tax laws that exclude debt cancellation income for insolvent or bankrupt taxpayers.  Clearly, it is important that taxpayers in these circumstances be informed of the insolvency and bankruptcy exceptions, so that they are not taxed on the debt forgiveness income.

But for other taxpayers, it is not clear that debt cancellation income exclusion is necessary.  The CRS report notes a number of equity issues that arise with the exclusion for taxpayers who are not insolvent. 

"An exclusion of forgiven debt may also reduce the tax system’s progressivity — the proposed provision, in other words, would likely favor upper-income individuals. This would occur because an exclusion of a given amount is more valuable to persons with higher marginal tax rates. This effect would be magnified if homeownership is more concentrated among upper income individuals. … [Assuming debt cancellation income of $20,000, t]he value of the exclusion for a homeowner with lower income, who may be in the 15% income tax bracket, is $3,000, while the value to another homeowner, with higher income in the 28% bracket, is $5,600. Thus, the higher income taxpayer, with presumably greater ability to pay taxes, receives a greater tax benefit than the lower income taxpayer."

Similarly, the CRS notes the many subsidies for home ownership already provided in the tax laws.  "The deduction for mortgage interest is the most costly provision, with an estimate of $85.2 billion in revenue loss for FY 2008.  The exclusion of gain on the sales of homes is the second largest tax provision for homeowners, with an estimate of $30.1 billion in tax revenue loss for FY2008. The deduction of state and local real estate taxes is the third provision, with an estimate of $14.2 billion in tax revenue loss for FY2008."

Those subsidies benefit most taxpayers at the top of the income distribution where home ownership is concentrated and where tax brackets provide a greater benefit.  They amount to significant incentives for substantial investment in housing.  Those incentives have led some economists to suggest that the tax laws cause Americans to over invest in housing, to the detriment of more productive investments that would strengthen the economy.

If Congress decides to enact a debt cancellation exclusion provision in spite of the equity issues involved, it might want to at least consider some of the options discussed in the report.  They include:

• Disallow the exclusion for debt forgiveness income where the debt is a home equity line of credit ;
• Provide a cap on the amount of cancelled debt income that can be excluded
• Provide a cap on income eligibility for the provision

Disallowing the income exclusion for home equity indebtedness seems critical to the fairness of any provision for relieve.  Home equity loans are frequently taken out to fund general personal consumption.  If only homeowners can enjoy the exclusion for personal consumption debt, it raises a serious equity issue.   Similarly, use of a cap for the debt cancellation income exclusion would provide some assurance that the provision would not act as an incentive to irresponsible borrowing.  Finally, the income cap for eligibility for the provision is essential.  The exclusion should be limited to lower-income taxpayers who would likely suffer the most financial distress from the added tax burden. 

Children's Health? the House Fails

The House failed to override Bush's veto of the bill passed to renew and expand the State Children's Health Insurance Program (" S-CHIP") which was intended to make health care available to the millions of uninsured children in the country.  See David Stout, House Fails to Override Veto, NY Times, Oct. 18, 2007.   The motion to override fell 13 votes short.

Congress wanted to spend an additional $35 billion over 5 years, to reach all 9 million uninsured children.  Bush wants only $5 billion more, clearly insufficient to address the pressing needs. Bush had originally criticized the expansion attempt  because it  is  the government doing what the market has been unable to do.  Bush seemed to view it as a step towards full government provision of health care.  Let's face it--this is a need, the market is failing millions of children, and it is time for the government to act.  The fact that government can do this, and do it well, is not a negative, as Mr. Bush seems to view it, but a plus, because it means we can address a problem that is disgraceful in a wealthy country such as ours. 

Other Republicans like Steve King from Iowa were more crass, casting aspersions on the desperately needed government program as "Socialized, Clinton-style Hillarycare for illegals and their parents."  Jonathan Weisman and Christopher Lee, House Fails to Overturn Bush Veto on Children's Health Insurance, Washington Post, Oct. 18, 2007.  That snide remark includes put-downs of a number of real people, using labels that are intended to bring prejudice and not rational policy thinking to the surface.  Consider Mr. King's apparent targets:  those who can't afford health care at all if it isn't through our social system that provides safety nets ; those who have followed a progressive approach to addressing the problems of the underprivileged among us; those who support comprehensive health care, as urged by Senator Clinton; those who think women should not be treated with disrespect, as the term "Hillarycare" clearly does; and those who think that children deserve compassionate care, even if their parents have entered this country illegally.  As a linguist by training, I particularly find the use of the term "illegals" gauling--it is intended to objectify all of the children that S-CHIP is intended to help, to encourage us to view them as undeserving, a second-class of people that we need not be concerned about.  Shame on you, Mr. King, for your willingness to stoop to that level in this debate.

The Republicans also say the program should not address anyone other than poor kids.  But the middle class is struggling with health care costs, and a CBS News Poll found "overwhelming" support for some expansion of this program to middle-class children.  House Fails to Override Veto.

According to the Post article, it looks like the House leadership is amenable to treating children of illegal immigrants as undeserving of this protection, as the reports of the discussions post failure to override indicate that the language will be tightened to make sure that no children of illegal immigrants can be covered.  They may also be willing to limit coverage to 300% of the federal poverty level (about $60,000 for a family of four), in spite of the fact that cost of living varies across the country such that some states have thought it appropriate to extend coverage beyond that limit.  These possible compromises are mentioned in the Post article.   House Fails to Overturn Bush Veto on Children's Health Insurance. But the Post also notes that "House Democrats had given up plenty already, scaling back their far more ambitious bill to meet the demands of Senate Republicans, such as Orrin Hatch (Utah) and Charles E. Grassley (Iowa), who virtually dictated the final bill's parameters."  Id.

House Speaker Nancy Pelosi urged House members to vote "as though their children's lives depend on their votes."   House Fails to Overturn Bush Veto on Children's Health Insurance.  Apparently, too few of the House members heeded that call.  The good news is that 44 Republicans voted with all but two of the Democrats to override, representing a larger majority than first passed the bill.  There is a fairly strong likelihood that more naysayers will see the light when the bill next comes before the House and as elections near.

The AMT: A One-Year Patch

Senator Baucus, Chair of the Senate Finance Committee, said this week that he would move a one-year patch on the alternative minimum tax (AMT) rather than attempt any larger reform of the provision.  Today, House Ways and Means Chair Rangel concurred, saying that he will introduce a stopgap measure to prevent the extension of the AMT further down the distribution this year, and introduce a more comprehensive tax bill that would repeal the AMT that would likely not be acted on this year. 

While the reach of the AMT into the middle class extends each year because of the interaction of lack of indexation and the upward creep of incomes, the most significant numbers impacted are upper middle income families with incomes in the $200,000 to $500,000 range.  (The highest income families do not pay AMT since their regular tax liability is higher because they are in the highest rate bracket, even though the regular tax base is less broad than the AMT base.)

The cost of repeal is a major consideration.  Repealing the AMT will result in billions of dollars of lost revenues to the fisc.  Repealing the AMT and making the Bush tax cuts permanent could have strongly negative budgetary consequences.

Both Baucus and Rangel have suggested that action on the carried interest issue--the ability of hedge fund and private equity fund managers to earn what seems clearly to be compensation income yet have it transformed into income taxed at preferential capital gains rate by the alchemy of the current treatment of a partnership "profits" interest-- may come into play in connection with the AMT as a possible revenue raiser, though most likely only in a bigger package to be considered next year.  Rangel has left an opening for making the carried interest change in connection with this year's AMT patch, according to BNA's Oct. 17 Daily Tax Report (RealTime).

Finally, the same BNA release notes that Senator Grassley, ranking minority member on the Senate Finance Committee, said today that a compromise might be to index the AMT for inflation so as to eliminate the downward creep, while at the same time making some adjustments to limit the AMT to the "superrich".   That may be the start towards a workable solution.  I have urged that the AMT be indexed for inflation, starting with a suitable exemption level that would protect ordinary middle class taxpayers from the AMT.   A reasonable amount for the exemption level would be around $100,000 (twice the median income) or at most perhaps as much as $150,000 (three times the median income).  In that way, the AMT would apply only to the upper-middle class and above--those at the top of the income distribution.  I'd also add the capital gains preference to AMT adjustments, so that the huge benefit of the capital gains rate is undone for taxpayers in the upper brackets.  My version would include more taxpayers and more items within the AMT's reach than Senator Grassley's (and cost less to enact), but both would accomplish a core goal of exempting ordinary taxpayers.

Material Adviser Reporting: IRS Notice 2007-85

In Notice 2007-85 Download material_adviser_reporting. Forms.101607.doc , the IRS provided guidance today for material advisers who must begin filing reports under the expanded material adviser reporting requirements for reportable transactions.  The new form, Form 8918, is not yet available, yet material advisers are required to begin reporting October 31.  Until the new form is available, the IRS announced that advisers may satisfy disclosure requirements by filing Form 8264, the existing form that promoters use to register registration-required tax shelter transactions.