Daily Tax Update - September 30, 2008

BUSH: “THIS IS NOT THE END OF THE LEGISLATIVE PROCESS”:  Today, President Bush expressed disappointment that the House did not pass the $700 billion bailout package. The President said, “Yesterday, the House of Representatives voted on a financial rescue plan that had been negotiated by Congressional leaders of both parties and my administration. Unfortunately, the measure was defeated by a narrow margin. I'm disappointed by the outcome, but I assure our citizens and citizens around the world that this is not the end of the legislative process.” The President added, “I recognize this is a difficult vote for members of Congress. Many of them don't like the fact that our economy has reached this point, and I understand that. But the reality is that we are in an urgent situation, and the consequences will grow worse each day if we do not act.”

• The President continued, “My administration will continue to work closely with leaders of both parties on Capitol Hill. I appreciate their determined efforts. While Congress is out today for the Jewish holiday, my administration will be talking to Congressional leaders today about how we can move legislation forward when members begin returning to the Capitol tomorrow. Our economy is depending on decisive action from the government. The sooner we address the problem, the sooner we can get back on the path of growth and job creation. This is what elected leaders owe the American people, and I am confident that we'll deliver.”
• Today, Senate Majority Leader Harry Reid said that the Senate would hold a vote on the bailout bill, but did not specify a timetable. Reid said, “The blame game needs to end. . .We need to move on to doing what’s right for our country.” Reid added, “I  am hopeful and I am confident that all sides, House and Senate, White House, will work together to achieve a goal that will be good for the American people.”
• Minority Leader Mitch McConnell also said today that he would work with Reid to get the legislation passed. McConnell said, “We will get the job done. We will get it done this week and hopefully that will convince the American people that Congress can rise to the occasion, act like grownups if you will, and get the job done for all of our people.” 
• The President’s remarks can be accessed via: http://www.whitehouse.gov/news/releases/2008/09/20080930.html

ACTION ON TAX EXTENDERS/AMT MAY BE DELAYED UNTIL NEXT YEAR:  A continuing dispute between the House and Senate over offsetting the cost of the tax extenders package threatens to derail passage this year. Yesterday, House Majority Leader Hoyer said that he continues to hold discussions with Senate Majority Leader Reid, but that final passage of both the tax extenders and an AMT patch could slip to next year. However, both parties are hoping that an agreement can be reached before final adjournment. There is also the possibility that action could occur if Congress returns for a lame-duck session after the election.

• The House is scheduled to return on October 2 to try to vote on the financial bailout package again and they could also act on the tax extenders/AMT bills.
• The House has already passed extenders bills that are fully offset. Hoyer said, “They've had them for months and months and months and months, and when do they send us something back? Forty-five minutes ago, while we are in one of the most important debates that we've had in this Congress, at a time when in honoring the faith of a lot of our members we must leave in broad daylight.”
• Reid said, “I've tried to explain to my House colleagues how difficult it is for me to accept what they've sent us. They've broken this up and said, 'Hey, look ... this is what we want. And you should take it.'” Reid added, “I don't have that ability here. I do not have the strength and the power legislatively, procedurally that they have in the House. The House is like the British Parliament.”

MISCELLANEOUS GUIDANCE ISSUED TODAY:

• Revenue Procedure 2008-58 provides guidance to taxpayers receiving certain settlement offers with respect to auction rate securities. 
• Notice 2008-82, protects reservists from losing funds in their health Flexible Spending Arrangement (health FSA) accounts after being called to active duty.
• Notice 2008-86 explains the circumstances under which the 4-year replacement period under section 1033(e)(2) is extended for livestock sold on account of drought.

TAX BILLS INTRODUCED SEPTEMBER 29^TH:
H.R.7236: To amend the Internal Revenue Code of 1986 to increase the deduction for business start-up expenditures from $5,000 to $10,000.
Sponsor: Rep Shea-Porter, Carol [NH-1] (introduced 9/29/2008)      Cosponsors (4)

H.R.7237: To amend the Internal Revenue Code of 1986 to repeal the phasedown of the credit percentage for the dependent care credit.
Sponsor: Rep Shea-Porter, Carol [NH-1] (introduced 9/29/2008)      Cosponsors (4)

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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