Corporate board members may be up to their ears in a zillion pressing business issues competing for their limited time and attention, but that’s no excuse for taking their eyes off the tax-risk ball, according to IRS Commissioner Doug Shulman. In remarks to the National Association of Corporate Directors on Monday, Shulman pointed out what few finance execs will need reminding of — that tax strategies are a significant source of financial and restatement risk, not to mention reputational exposure. “In today’s business climate, the general public has little tolerance for overly aggressive tax planning that can be viewed as corporations playing tax games,” he added.

The Commissioner recommended that boards set up a “mechanism to oversee tax risk as part of [their] governance process,” including the following actions:

• Set a threshold confidence level for taking a tax position.

• Discourage or eliminate opinion shopping by tax departments by having an independent tax firm, which has some direct dialogue with the board of directors, review major tax positions.

• Specifically address transfer pricing and the relative profit allocated to low-tax jurisdictions, and make sure they reflect real economic contributions made in those jurisdictions.

The emphasis on transfer pricing is interesting; tax departments are becoming increasingly aware of the risks in this area, and they’re stepping up their compliance efforts, as I noted here. However, it’s likely that relatively few corporate directors are up to speed on the latest developments in the world of intercompany transfers and their tax implications, the more so since this is one of those areas of the tax code whose sheer complexity “may make your eyes glaze over,” in Shulman’s words.

You can’t blame Shulman for wanting to enlist directors’ help in getting companies to take tax risk seriously. By the same token, though, I can’t resist pointing out that the Commissioner has his work cut out to get his own house in order. The Treasury Inspector General for Tax Administration (TIGTA) has been on the agency’s case in a big way in the last couple of weeks, as I blogged here. And yet another TIGTA report, released today, reveals some pretty startling shortcomings in two IRS programs that provide help for taxpayers from volunteer tax preparers. A staggering 41 percent of the returns filed under these programs were inaccurate, TIGTA found. ###