I 

108TH CONGRESS 

1ST SESSION H. R. 3599

To prevent corporate auditors from providing tax shelter services to their 

audit clients. 

IN THE HOUSE OF REPRESENTATIVES 

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 

A BILL

To prevent corporate auditors from providing tax shelter 

services to their audit clients.

1 Be it enacted by the Senate and House of Representa2 tives of the United States of America in Congress assembled,

3 SECTION 1. SHORT TITLE. 

4 This Act may be cited as the ‘‘Auditor Independence 

5 and Tax Shelters Act’’. 

6 SEC. 2. PROHIBITION ON AUDITORS PROVIDING TAX SHEL7 TER SERVICES TO AUDIT CLIENTS. 

8 Section 10A of the Securities Exchange Act of 1934 

9 (15 U.S.C. 78j–1) is amended—

10 (1) in subsection (f)—
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1 (A) in the first sentence, by striking ‘‘sec2 tion, the term’’ and inserting the following: 

3 ‘‘section—

4 ‘‘(1) the term’’; 

5 (B) by striking ‘‘law. As used in this sec6 tion, the term’’ and inserting the following: 

7 ‘‘law; 

8 ‘‘(2) the term’’; and 

9 (C) by striking the period at the end and 

10 inserting the following: ‘‘; and 

11 ‘‘(3) the term ‘tax shelter services’ means serv12 ices provided by a registered public accounting firm 

13 (or by an associated person of that firm) to an 

14 issuer, or an officer or director of an issuer, to de15 sign, organize, promote, assist, or execute any in16 vestment, entity, plan, arrangement, or transaction 

17 for which a significant purpose is the avoidance or 

18 evasion of Federal income tax by such issuer, or an 

19 officer or director of such issuer, whether acting as 

20 a direct or indirect participant, and for which such 

21 firm may receive fees in excess of $100,000 in the 

22 aggregate.’’; 

23 (2) in subsection (g)—

24 (A) in paragraph (8), by striking ‘‘and’’ at 

25 the end; 
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1 (B) by redesignating paragraph (9) as 

2 paragraph (10); and 

3 (C) by inserting after paragraph (8) the 

4 following: 

5 ‘‘(9) tax shelter services; and’’; 

6 (3) in subsection (h)—

7 (A) by inserting ‘‘other than tax shelter 

8 services’’ after ‘‘tax services’’; and 

9 (B) by striking ‘‘(9)’’ and inserting ‘‘(10)’’; 

10 and 

11 (4) in subsection (i)(1)—

12 (A) by redesignating subparagraph (B) as 

13 subparagraph (C); and 

14 (B) by inserting after subparagraph (A) 

15 the following: 

16 ‘‘(B) ASSURANCE OF AUDITOR INDEPEND17 ENCE.—Before preapproving a non-audit serv18 ice that is not otherwise prohibited under this 

19 section, the audit committee of an issuer 

20 shall—

21 ‘‘(i) determine whether there is a rea22 sonable likelihood that provision of the 

23 non-audit service would impair the inde24 pendence of the registered public account25 ing firm by resulting in the firm—
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1 ‘‘(I) auditing its own work for 

2 the issuer; 

3 ‘‘(II) performing a management 

4 function for the issuer; 

5 ‘‘(III) advocating in a public 

6 forum for the issuer; or 

7 ‘‘(IV) promoting the stock or 

8 other financial interest of the issuer; 

9 and 

10 ‘‘(ii) if the audit committee deter11 mines that such a reasonable likelihood ex12 ists, the audit committee shall not provide 

13 advance approval of such service under this 

14 section.’’. 

15 SEC. 3. EFFECTIVE DATE. 

16 This Act, and the amendments made by this Act, 

17 shall take effect on the date of enactment of this Act, and 

18 shall apply to any tax shelter service, as defined in section 

19 10A of the Securities Exchange Act of 1934, as amended 

20 by this Act, that is submitted for preapproval to the audit 

21 committee of an issuer or is provided by a registered pub22 lic accounting firm to an issuer in accordance with that 

23 section 10A on or after the date of enactment of this Act.

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