To prevent corporate auditors from providing tax shelter services to their audit clients.

November 21, 2003

Mr. EMANUEL (for himself, Mr. FOLEY, Mr. STUPAK, Mr. CAMP, and Mr. LANTOS) introduced the following bill; which was referred to the Committee on Financial Services

To prevent corporate auditors from providing tax shelter services to their audit clients.

Be it enacted by the Senate and House of Representatives of the United States of America in Congress assembled,

SECTION 1. SHORT TITLE.

This Act may be cited as the `Auditor Independence and Tax Shelters Act'.

SEC. 2. PROHIBITION ON AUDITORS PROVIDING TAX SHELTER SERVICES TO AUDIT CLIENTS.

Section 10A of the Securities Exchange Act of 1934 (15 U.S.C. 78j-1) is amended--

(1) in subsection (f)--

(A) in the first sentence, by striking `section, the term' and inserting the following: `section--

`(1) the term';

(B) by striking `law. As used in this section, the term' and inserting the following: `law;

`(2) the term'; and

(C) by striking the period at the end and inserting the following: `; and

`(3) the term `tax shelter services' means services provided by a registered public accounting firm (or by an associated person of that firm) to an issuer, or an officer or director of an issuer, to design, organize, promote, assist, or execute any investment, entity, plan, arrangement, or transaction for which a significant purpose is the avoidance or evasion of Federal income tax by such issuer, or an officer or director of such issuer, whether acting as a direct or indirect participant, and for which such firm may receive fees in excess of $100,000 in the aggregate.';

(2) in subsection (g)--

(A) in paragraph (8), by striking `and' at the end;

(B) by redesignating paragraph (9) as paragraph (10); and

(C) by inserting after paragraph (8) the following:

`(9) tax shelter services; and';

(3) in subsection (h)--

(A) by inserting `other than tax shelter services' after `tax services'; and

(B) by striking `(9)' and inserting `(10)'; and

(4) in subsection (i)(1)--

(A) by redesignating subparagraph (B) as subparagraph (C); and

(B) by inserting after subparagraph (A) the following:

`(B) ASSURANCE OF AUDITOR INDEPENDENCE- Before preapproving a non-audit service that is not otherwise prohibited under this section, the audit committee of an issuer shall--

`(i) determine whether there is a reasonable likelihood that provision of the non-audit service would impair the independence of the registered public accounting firm by resulting in the firm--

`(I) auditing its own work for the issuer;

`(II) performing a management function for the issuer;

`(III) advocating in a public forum for the issuer; or

`(IV) promoting the stock or other financial interest of the issuer; and

`(ii) if the audit committee determines that such a reasonable likelihood exists, the audit committee shall not provide advance approval of such service under this section.'.

SEC. 3. EFFECTIVE DATE.

This Act, and the amendments made by this Act, shall take effect on the date of enactment of this Act, and shall apply to any tax shelter service, as defined in section 10A of the Securities Exchange Act of 1934, as amended by this Act, that is submitted for preapproval to the audit committee of an issuer or is provided by a registered public accounting firm to an issuer in accordance with that section 10A on or after the date of enactment of this Act.

END