Daily Tax Update - September 22, 2008

ECONOMIC RECOVERY PACKAGE DOMINATES CONGRESSIONAL AGENDA:  Today, President Bush urged Congress not to load up the $700 billion bailout bill with additional provisions. Congressional leaders want to pass the measure by the end of this week.

• President Bush said today, “Obviously, there will be differences over some details, and we will have to work through them. That is an understandable part of the policy making process. But it would not be understandable if Members of Congress sought to use this emergency legislation to pass unrelated provisions, or to insist on provisions that would undermine the effectiveness of the plan. I appreciate Members of Congress in both parties resisting the urge to do so, and keeping the rescue bill focused on solving the crisis in our financial markets. Americans are watching to see if Democrats and Republicans, the Congress and the White House, can come together to solve this problem with the urgency it warrants. Indeed, the whole world is watching to see if we can act quickly to shore up our markets and prevent damage to our capital markets, businesses, our housing sector, and retirement accounts. Failure to act would have broad consequences far beyond Wall Street. It would threaten small business owners and homeowners on Main Street.”
• House Financial Services Chairman Barney Frank said today that Treasury Secretary Henry Paulson is being “entirely unreasonable” by asking Congress to pass a broad rescue package in the next 24 hours. Frank added that it was “outrageous” that Paulson would not allow lawmakers to add language to cap the compensation of executives at the firms being bailed out. Frank said that Paulson “is being entirely unreasonable when he’s worked on this for some days, sent it to us Saturday morning and wants it passed by Monday.” However, Frank added, “I am reasonably certain the House will have passed this by the end of the week.”
• Senate Banking Committee Chairman Christopher Dodd said today, “The last thing any of us want is to be back here in a month coming up with some new plan because this didn't work. It's important that we act quickly, but it's more important that we act responsibly.” Dodd added, “I want clean and simple. But again, I want accountability and I want some reciprocity here that doesn’t get away from and complicate the secretary’s job.”
• Yesterday, House Speaker Nancy Pelosi said, “We will simply not hand over a $700 billion blank check to Wall Street and hope for a better outcome. Democrats believe a responsible solution should include independent oversight, protections for homeowners and constraints on excessive compensation.”
• The legislative proposal for Treasury authority to purchase mortgage-related assets can be accessed via: http://www.washingtonpost.com/wp-dyn/content/article/2008/09/20/AR2008092002376_pf.html
• The adjournment date for Congress is likely to be delayed by a week. Congress is also hopeful to complete action on the expiring tax provisions, as well as a one-year patch for the Alternative Minimum Tax before adjourning. However, House Democrats are still insisting that the provisions comply with pay/go budget rules.

MISCELLANEOUS GUIDANCE RELEASED TODAY:

IRS Notice 2008-81, which provides guidance relating to a temporary program being provided by the Treasury Department to money market funds to maintain stable $1.00 per share net asset values. The Notice provides that the Treasury Department and the Internal Revenue Service will not assert that the Program violates the restrictions against Federal guarantees of tax-exempt bonds with respect to any tax-exempt bond assets held by tax-exempt money market funds participating in the Program, and will not impair the ability of a money market fund participating in the Program to designate exempt interest dividends or of the shareholders of such a fund to claim the benefits of tax exemption with respect to such exempt interest dividends.

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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