Daily Tax Update - October 1, 2008

SENATE VOTE ON REVISED BAILOUT / TAX EXTENDERS / AMT BILL TONIGHT:   Later tonight, the Senate will vote on legislation combining the $700 billion bailout bill with a partially offset $148 billion tax extenders bill and a one-year, unoffset patch for the AMT. The offsets for the tax extenders bill include a requirement that securities brokers report the cost basis of stock transactions, a $25.2 billion provision treating deferred compensation paid by “tax-indifferent entities” as current income, and freezing the section 199 domestic manufacturing deduction at 6% for oil and gas producers.

• Lawmakers also revised the bailout bill yesterday to provide for a one-year increase to $250,000 from $100,000 for the limit on individual bank deposits guaranteed by the government.
• Today, Senate Majority Leader Harry Reid said, “Now is not the time for politics and partisanship. This was a jointly agreed upon bill.  We agree that now is not the time for partisanship. I say to my friends in the House of Representatives, we’ve got to get this done. We cannot leave Washington without doing the financial rescue package and not doing this tax-extender bill.”
• Today, House Majority Leader Steny Hoyer predicted the extenders/AMT/bailout bill will pass the Senate, but said that it could be troublesome for some Democrats who have insisted that the tax extenders be paid for. Hoyer said, “There’s no doubt the tax package is very controversial. There’s no doubt in my mind that the Senate added this because they thought that’s the only way they could get it passed. Hoyer added, “I’m not particularly pleased with that addition myself, quite frankly.” 
• The House is expected to vote on the new bailout bill Friday. House Majority Whip James Clyburn said, “We won’t be able to vote on this until Friday. Hopefully, we can have some debate, maybe on the rule tomorrow, as well as maybe some other bill, but we won’t be able to vote on it until Friday.”
• The text of the Senate bailout bill can be accessed via: http://banking.senate.gov/public/_files/latestversionAYO08C32_xml.pdf  or http://www.steptoe.com/attachment.html/3554.pdf
• One page summary of Senate bailout bill via:  http://banking.senate.gov/public/_files/latestversionEESASummary.pdf
• Section by section analysis via:  http://banking.senate.gov/public/_files/latestversionBill_sectionbysectionF.pdf
• Legislative Text to the Tax Proposals in the Emergency Economic Stabilization Act of 2008 
• Staff Summary of the Tax Proposals in the Emergency Economic Stabilization Act of 2008 

MISCELLANEOUS GUIDANCE ISSUED TODAY:

Notice 2008-88 which amends and supplements Notice 2008-41, 2008-15 I.R.B. 742 (April 14, 2008), by: (1) providing that the Treasury Department and the IRS will treat a tax-exempt “qualified tender bond” (as defined in Notice 2008-41) or “tax-exempt commercial paper” (as defined in § 2 of this Notice) that is purchased by its “governmental issuer” (as defined in Notice 2008-41) on a temporary basis as continuing in effect without resulting in a reissuance or retirement of the purchased tax-exempt bond if the governmental issuer holds the bond until not later than December 31, 2009; and (2) extending the final date for the purchase of bonds pursuant to a qualified tender right, and the final date on which covered waivers of interest rate caps are disregarded, to December 31, 2009. 

Notice 2008-83 provides guidance regarding the proper treatment under section 382(h) of the Internal Revenue Code of certain items of deduction or loss allowed after an ownership change to a bank. Affected corporations may rely upon this guidance, unless and until there is additional guidance.

Fourth Quarter 2008 Interest Rates Effective Today:  Revenue Ruling 2008-47 announces that interest rates for the calendar quarter beginning Oct. 1, 2008 will increase by one percentage point.

The new rates are:

• Six (6) percent for overpayments [five (5) in the case of a corporation];
• Six (6) percent for underpayments;
• Eight (8) percent for large corporate underpayments; and
• Three and one-half (3.5) percent for the portion of a corporate overpayment exceeding $10,000.

TAX BILL INTRODUCED SEPTEMBER 30^TH:
S.3655 : A bill to amend the Internal Revenue Code of 1986 to exclude from an employee's gross income any employer-provided supplemental instructional services assistance, and for other purposes.
Sponsor: Sen Snowe, Olympia J. [ME] (introduced 9/30/2008)      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.

STEPTOE & JOHNSON LLP - TAX PRACTICE
Steptoe & Johnson LLP has one of the largest and most diverse law firm tax practices in the country. The practice covers the entire spectrum of federal taxation, including representation of businesses before the Congress, Treasury and the national office of the IRS; transactional planning for domestic and multinational corporations; complex audit and controversy work for corporations and other business interests contesting IRS adjustments; litigation before the Tax Court, Court of Federal Claims, district courts, courts of appeals and the Supreme Court. The firm's tax practice also encompasses all aspects of employee benefits (ERISA), executive compensation, tax-exempt organizations and charitable giving. Steptoe has an extensive state and local tax practice, representing an array of business clients on complex sales and use tax, corporate income tax and property tax matters, both advising those clients and handling audits, administrative appeals, and litigation for them. Read more information on Steptoe's tax practice.

• Learn more about the members of the tax practice group.