Daily Tax Update - September 16, 2008

SENATE LEADERS CLOSE TO DEAL ON EXTENDERS PACKAGE:  Last night, Senate Democrats and Republicans were reportedly on the verge of a breakthrough on the tax extenders package. The agreement involves dropping two of the controversial offsets. The House has insisted that the tax extenders comply with pay/go budget rules. A spokesperson for House Majority Leader Steny Hoyer said that he “continues to focus on working with the Senate to pass a paid-for bill.” 

• Senate Majority Leader Harry Reid said, “I hope we can do this because this is something that is passable. We need to do it to get this tax credit stuff done and the tax extenders done.” 
• The two offsets that would be dropped under the tentative agreement include a provision that provides for a new tax on the extraction of crude oil and natural gas from Gulf of Mexico waters and a provision further delaying the “worldwide allocation” of interest costs until 2019. he recently passed housing stimulus bill delayed the new rules for two years.

IRS RELEASES INFORMATION ON NEW FIRST-TIME HOMEBUYER TAX CREDIT:  Today, the IRS provided information on the new tax credit included in the recently enacted Housing and Economic Recovery Act of 2008.

• According to the IRS, “Available for a limited time only, the credit:
  • Applies to home purchases after April 8, 2008, and before July 1, 2009.
  • Reduces a taxpayer’s tax bill or increases his or her refund, dollar for dollar.
  • Is fully refundable, meaning that the credit will be paid out to eligible taxpayers, even if they owe no tax or the credit is more than the tax that they owe.”
• The IRS added, “However, the credit operates much like an interest-free loan, because it must be repaid over a 15-year period. So, for example, an eligible taxpayer who buys a home today and properly claims the maximum available credit of $7,500 on his or her 2008 federal income tax return must begin repaying the credit by including one-fifteenth of this amount, or $500, as an additional tax on his or her 2010 return.”
• Additional information can be accessed here. 

TAX BILLS INTRODUCED SEPTEMBER 15^TH:
H.R.6896: To amend the Internal Revenue Code of 1986 to make permanent the reduction in the rate of tax on qualified timber gain of corporations, and for other purposes.
Sponsor: Rep Davis, Artur [AL-7] (introduced 9/15/2008)      Cosponsors (30)

S.3488: A bill to amend the Internal Revenue Code of 1986 to provide for a tax credit for qualified donations of employee services.
Sponsor: Sen Hatch, Orrin G. [UT] (introduced 9/15/2008)      Cosponsors (1) 

INTERNAL REVENUE SERVICE - CIRCULAR 230 DISCLOSURE:
As provided for in Treasury regulations, advice (if any) relating to federal taxes that is contained in this communication (including attachments) is not intended or written to be used, and cannot be used, for the purpose of (1) avoiding penalties under the Internal Revenue Code or (2) promoting, marketing or recommending to another party any plan or arrangement addressed herein.

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