Daily Tax Update - September 26, 2008

PRESIDENT BUSH: “WE ARE GOING TO GET A PACKAGE PASSED”:  Today, President Bush urged Congressional leaders to pass the financial rescue plan after the agreement fell apart last night. House Republicans refused to sign on to a bipartisan $700 billion rescue plan announced yesterday and offered a counter proposal. Negotiations remained in a state of flux throughout the day as lawmakers and the Administration continued to try to reach an agreement. Today, Banking Committee ranking member Richard Shelby said that Paulson’s plan is a “flawed deal.”

• This morning, the President said, “My administration continues to work with the Congress on a rescue plan and we need a rescue plan. This is hard work. Our proposal is a big proposal and the reason it's big and substantial is because we have got a big problem.” Bush added, “There are disagreements over aspects of the rescue plan, but there is no disagreement that something substantial must be done. The legislative process is sometimes not very pretty, but we are going to get a package passed. We will rise to the occasion. Republicans and Democrats will come together and pass a substantial rescue plan.” 
• Today, the White House press secretary said, “There are some alternatives and variations to what we have proposed that have come forward. What the president said he would do is, at the end of the day, when this legislation is crafted, that he would look to his secretary of the Treasury and Ben Bernanke, the [Federal Reserve] chairman, and he would ask them one question: ‘Does this legislation do what needs to be done in order to help save the economy?’” The spokesperson added: “If their answer is ‘yes,’ then we’ll all have done our duty on behalf of the American people. . . I think there’s still some modifications that some of the Members want to see in that regard — we’re willing to look at them.”
• Senate Majority Leader Harry Reid said, “We're going to get this done and stay in session as long as it takes to get it done.”
• House Speaker Nancy Pelosi said that an agreement would come within the next 24 hours. Pelosi said, “It will happen because it has to happen.” 

SENATE TO VOTE ON STIMULUS PACKAGE THIS WEEKEND:  Senate Democratic leaders have put together a $56.2 billion economic stimulus package that includes a seven-week extension of unemployment insurance benefits, a temporary 10 percent increase in food stamp benefits, and $19.6 billion for states to address rising Medicaid costs.

• Today, Senate Majority Leader Harry Reid said that the Senate would be in session next week. “[W]e’re going to come in about 9:30 Saturday morning. We’re going to vote an hour of that on the [continuing resolution]. There are other things that perhaps we can do tomorrow. We’ll certainly try. It appears quite evident that we’ll be in next week.” 

HOUSE PASSES TAX EXTENDERS BILL OVER ADMINISTRATION’S VETO THREAT:  Today, the House passed a revenue-neutral, two-year energy and tax extenders bill despite a veto threat by the Administration. The Administration criticized the offsets in the House bill as well as the House’s action to pass a separate AMT patch bill. It is uncertain what the next step will be since the House’s bill is different than the Senate-passed version.

MISCELLANEOUS GUIDANCE RELEASED TODAY:
Revenue Procedure 2008-63 provides that if a securities loan under § 1058 of the Internal Revenue Code is terminated because of the bankruptcy of the borrower or an affiliate, and the lender applies the collateral to the purchase of identical securities, the Internal Revenue Service will treat that purchase as an exchange to which § 1058(a) applies. As a result, the lender will receive the same nonrecognition treatment under § 1058(a) that it would have received if the borrower had returned identical securities upon the termination of the loan.

Revenue Procedure 2008-61 explains areas in which rulings and determination letters will not be issued as to the tax consequences of arrangements described in § 409A of the Internal Revenue Code.

Notice 2008-84 announces that the Internal Revenue Service and the Treasury Department will issue regulations under section 382(m) of Code that address the application of section 382 in the case of certain acquisitions not described in Notice 2008-76, I.R.B. 2008-39, in which the United States acquires a direct or indirect more-than-50-percent interest in a loss corporation. The regulations to be issued under section 382(m) that are described in section 2 of this notice will apply for any taxable year ending on or after September 26, 2008, and will apply unless and until there is additional guidance.

PROPOSED RULES

Guidance Under Sections 642 and 643 (Income Ordering Rules); Hearing; Cancellation  via: http://federalregister.gov/OFRUpload/OFRData/2008-22823_PI.pdf

[REG-101258-08; Filed: 09/26/08 at 8:45 am; Publication Date: 9/29/2008]

Regulations Enabling Elections for Certain Transactions Under Section 336(e); Correction via: http://federalregister.gov/OFRUpload/OFRData/2008-22822_PI.pdf

[REG-143544-04; Filed: 09/26/08 at 8:45 am; Publication Date: 9/29/2008]

Transfers by Domestic Corporations that are Subject to Section 367(a)(5):

Distributions by Domestic Corporations that are Subject to Section 1248(f); Correction via: http://federalregister.gov/OFRUpload/OFRData/2008-22820_PI.pdf

[REG-209006-89; Filed: 09/26/08 at 8:45 am; Publication Date: 9/29/2008]

Amendments to Section 7216 Regulations - Disclosure or Use of Information by Preparers of Returns; Hearing Cancellation via:  http://federalregister.gov/OFRUpload/OFRData/2008-22824_PI.pdf

[REG-121698-08; Filed: 09/26/08 at 8:45 am; Publication Date: 9/29/2008]

Declaratory Judgments - Gift Tax Determinations; Hearing Cancellation  via: http://federalregister.gov/OFRUpload/OFRData/2008-22825_PI.pdf

[REG-143716-04; Filed: 09/26/08 at 8:45 am; Publication Date: 9/29/2008]

TAX BILLS INTRODUCED SEPTEMBER 25th:
H.R.7060: To amend the Internal Revenue Code of 1986 to provide incentives for energy production and conservation, to extend certain expiring provisions, to provide individual income tax relief, and for other purposes.
Sponsor: Rep Rangel, Charles B. [NY-15] (introduced 9/25/2008)      Cosponsors (None)

H.R.7064: To amend the Internal Revenue Code of 1986 to increase the credit amount for new qualified alternative fuel motor vehicles weighing more than 26,000 pounds and to increase the credit for certain alternative fuel vehicle refueling properties, and for other purposes.
Sponsor: Rep Kagen, Steve [WI-8] (introduced 9/25/2008)      Cosponsors (None)

H.R.7066: To amend the Internal Revenue Code of 1986 to expand the work opportunity tax credit to include disconnected youth.
Sponsor: Rep Rangel, Charles B. [NY-15] (introduced 9/25/2008)      Cosponsors (None)

H.R.7074: To amend the Internal Revenue Code of 1986 to simplify the deduction for use of a portion of a residence as a home office by providing an optional standard home office deduction.
Sponsor: Rep Gonzalez, Charles A. [TX-20] (introduced 9/25/2008)      Cosponsors (None)

H.R.7082: To amend the Internal Revenue Code of 1986 to permit the Secretary of the Treasury to disclose certain prisoner return information to the Federal Bureau of Prisons.
Sponsor: Rep Ramstad, Jim [MN-3] (introduced 9/25/2008)      Cosponsors (1)

H.R.7083: To amend the Internal Revenue Code of 1986 to enhance charitable giving and improve disclosure and tax administration.
Sponsor: Rep Lewis, John [GA-5] (introduced 9/25/2008)      Cosponsors (5)

H.R.7095: To amend the Internal Revenue Code of 1986 to allow individuals a deduction for qualified long-term care insurance premiums, a credit for individuals who care for those with long-term care needs, and for other purposes.
Sponsor: Rep Herseth Sandlin, Stephanie [SD] (introduced 9/25/2008)      Cosponsors (1)

H.R.7096: To amend the Internal Revenue Code of 1986 to allow a deduction for income attributable to business activities conducted in high job-loss areas.
Sponsor: Rep Higgins, Brian [NY-27] (introduced 9/25/2008)      Cosponsors (None)

H.R.7098: To amend the Internal Revenue Code of 1986 to exclude from gross income discharges of student loans the repayment of which is income contingent or income based.
Sponsor: Rep Levin, Sander M. [MI-12] (introduced 9/25/2008)      Cosponsors (2)

H.R.7103: To amend the Internal Revenue Code of 1986 to clarify the employment tax treatment and reporting of wages paid by professional employer organizations.
Sponsor: Rep Pomeroy, Earl [ND] (introduced 9/25/2008)      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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