Daily Tax Update - September 17, 2008

SENATE LEADERS REACH AGREEMENT ON TAX EXTENDERS / AMT PACKAGE:  Senate Finance Committee Chairman Max Baucus and Ranking Member Charles Grassley announced last night that they had reached an agreement to move legislation providing for a one-year patch of the alternative minimum tax, extending numerous expiring family and business tax cuts, and providing energy tax incentives.

• According to the Committee, the agreement includes the following elements: 
• “Clean energy tax incentives totaling approximately $17 billion, paid for by freezing the tax deduction for the domestic manufacturing activities of American oil and gas companies, by tightening the rules by which oil and gas companies pay taxes on income earned overseas, by freeing general fund monies with increased payments into the oil spill liability trust fund as new drilling is considered, by a one-year extension of the Federal Unemployment Tax Act surtax at the current level, and by increasing reporting requirements for brokers on sales of stock.
• An increase in the income threshold at which Americans become subject to the higher alternative minimum tax. This measure would protect approximately 20 million taxpayers from higher taxes at a cost of $64 billion. Baucus and Grassley do not expect the cost of the AMT ‘patch’ to be offset.
• Extensions of expiring family and business tax cuts and other policies – including badly needed tax relief for victims of natural disasters, an expansion of the child tax credit, and long-awaited legislation providing parity for mental health treatment in the US health care system. Extensions of expiring tax cuts will be partially offset by keeping hedge fund managers from using offshore corporations and other structures to defer taxes on compensation received for providing investment services.”
• Additional information can be accessed here and here.  

SENATE FOREIGN RELATIONS COMMITTEE ISSUES COMMITTEE REPORTS ON PROTOCOL AMENDING CANADIAN, BULGARIA AND ICELAND TAX TREATIES: Today, the Senate Foreign Relations Committee released the text of the Committee reports on the tax treaties with Canada, Bulgaria and Iceland. 

• For additional information, contact Philip R. West - pwest@steptoe.com  
• The documents can be accessed via:
• http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=110_cong_reports&docid=f:er015.110.pdf
• http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=110_cong_reports&docid=f:er016.110.pdf
• http://frwebgate.access.gpo.gov/cgi-bin/getdoc.cgi?dbname=110_cong_reports&docid=f:er017.110.pdf

MISCELLANEOUS GUIDANCE ISSUED TODAY:

Applicable Federal Rates:  Revenue Ruling 2008-49 provides various prescribed rates for federal income tax purposes for October 2008. 

Rulings and determination letters:  Revenue Procedure 2008-56 relaxes certain restrictions that now apply to the issuance of opinion and advisory letters for new pre-approved plans under Rev. Proc. 2007-44. Those restrictions effectively limit the ability of sponsors of pre-approved plans (such as banks, insurance companies and law firms) to apply for opinion and advisory letters for new plans after March 31, 2008, and also limit the ability of adopting employers to rely on the letters issued for new plans. 

Tax-Exempt Bond Partnerships: Eligibility for Monthly Closing Elections:  Notice 2008-80 proposes a Revenue Procedure that modifies Rev. Proc. 2003-84 by proposing additional criteria that must be met in order for tax-exempt bond partnerships to be eligible to make an election that enables the partners to take into account monthly the income, gain, loss and deduction inclusions required for partnerships.

TAX BILLS INTRODUCED SEPTEMBER 16^TH:
H.R.6914: To amend the Internal Revenue Code of 1986 to extend certain renewable energy provisions for 10 years, and for other purposes.
Sponsor: Rep Holt, Rush D. [NJ-12] (introduced 9/16/2008)      Cosponsors (None)

H.R.6915: To amend the Internal Revenue Code of 1986 to extend the alternative motor vehicle credit for 10 years, and for other purposes.
Sponsor: Rep Holt, Rush D. [NJ-12] (introduced 9/16/2008)      Cosponsors (None)

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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