Tax Article - CEOs of Required to Sign Declaration Ensuring Annual Federal Tax Returns Comply with the Internal Revenue Code

As part of a highway bill the Senate recently passed by a vote of 89 to 11, CEOs of both public and private companies would be required to sign under penalties of perjury a declaration that the company has in place procedures to ensure that the annual federal tax return complies with the provisions of the Internal Revenue Code and that the CEO has received reasonable assurances of the accuracy of all material items in the tax return. This provision would apply to federal income tax returns for tax years ending after the date of the bill’s enactment. 

Under current rules, the federal income tax return must be signed by an authorized officer of the corporation. The signature is made under penalties of perjury and states that the representative signing the return declares that he/she has "…examined the return, including accompanying schedules and statements, and to the best of my knowledge and belief, it is true, correct, and complete." 

The CEO’s statement would be in addition to the above officer’s declaration. In many cases, the CEO does not possess a technical or detailed knowledge of the corporation’s tax return. It is anticipated that the CEO’s declaration will be more limited in scope than the officer’s declaration with the intent that it will provide more assurance that the return is prepared with the appropriate level of care, focusing more on the existing corporate processes and procedures ensuring that the return complies with the Internal Revenue Code and underlying regulations and rules. It is expected that the IRS will issue guidance as to the implementation of this provision including situations where the corporation does not have a CEO or where multiple CEOs exist.

The Tax Executives Institute expressed reservations for this provision in a letter to Senate Finance Committee Chairman Charles Grassley (R-Iowa) and ranking Democrat Max Baucas (Mont.) noting that such a requirement of the CEO will result in less focus on other business activities without enhancing corporate governance. More specifically, TEI stated that "…the CEO declaration provision is ill-advised and urges that it be removed from the final highway bill."

Contact our Boston Tax Specialists for further developments on this matter:Email us or call us at 1 (888) 875-9770.

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