Daily Tax Update - October 3, 2008

HOUSE PASSES FINANCIAL BAILOUT BILL–PRESIDENT SIGNS BILL INTO LAW:  Today, by a vote of 263 to 171, the House approved the “Emergency Economic Stabilization Act of 2008” and the President quickly signed the bill into law. The bill will authorize the Treasury Department to purchase up to $700 billion in “troubled assets” from the nation’s financial institutions. The bill also includes a $149.2 billion tax “extenders” package and a one-year patch for the AMT. 

  • Earlier today, President Bush said, “A short time ago, the House of Representatives passed a bill that is essential to helping America's economy weather the financial crisis. The Senate passed the same legislation on Wednesday night. And when Congress sends me the final bill, I'm going to sign it into law.” The President continued, “By coming together on this legislation, we have acted boldly to help prevent the crisis on Wall Street from becoming a crisis in communities across our country. We have shown the world that the United States of America will stabilize our financial markets and maintain a leading role in the global economy.” The President added, “Our economy continues to face serious challenges. This morning, we learned that America lost jobs again in September--disappointing news that underscores the urgency of the bill that Congress passed today. It will take more time and determined effort to get through this difficult period. But with confidence and leadership and bipartisan cooperation, we'll overcome the challenges we face, return our nation to a path of growth, and job creation, and long-term economic prosperity.”
  • The bill's centerpiece is the Troubled Assets Relief Program, which will give the Treasury Department up to two years to purchase troubled assets from financial institutions while also placing certain limits on the compensation that can be paid to senior executives of those institutions. 
  • The bill also contains a number of changes to the tax code, including changes that affect the deductibility of compensation paid by bailout program participants to their senior executives. Perhaps most notably, the bill renews numerous expiring tax provisions, including the R&D credit, energy incentives, and several international tax deferral provisions. The bill also contains an AMT patch extension and extends and modifies the AMT credit allowance against tax on ISO gain.
  • Steptoe & Johnson LLP has summarized the bill's key economic stabilization provisions. Steptoe’s summary can be accessed via:  http://www.steptoe.com/assets/attachments/Alert.pdf  
  • For additional information, contact: Mark J. Silverman - msilverman@steptoe.com, Philip R. West - pwest@steptoe.com or Matthew D. Lerner - mlerner@steptoe.com
  • The text of the bill can be accessed here.
  • A summary of the tax extenders & AMT patch can be accessed here.

TAX FACT CHECK FOR THE VICE PRESIDENTIAL DEBATE: Two organizations have outlined the tax gaffes in last night’s Vice Presidential debate. 

MISCELLANEOUS GUIDANCE ISSUED TODAY:
Notice 2008-90 announces that the Service and the Treasury Department are studying the computation of the deductible amount and the adjustment to cost of goods sold for qualified contributions of inventory property, as defined in section 170(e)(3)(A) of the Code. Unless and until further guidance is issued, taxpayers may make these computations under either section 170(e)(3) or section 170(e)(1), and the regulations under those sections. The notice also requests comments regarding these computations and any other issues related to contributions of inventory.

TAX BILLS INTRODUCED OCTOBER 2nd:
H.R.7242: To make technical corrections to the Pension Protection Act of 2006 relating to the Internal Revenue Code of 1986, and for other purposes.
Sponsor: Rep Andrews, Robert E. [NJ-1] (introduced 10/2/2008)      Cosponsors (None)

H.R.7249: To amend the Internal Revenue Code of 1986 to provide a tax credit to farmers to offset high energy prices, to encourage the use of renewable energy, and to reduce prices to consumers.
Sponsor: Rep Holt, Rush D. [NJ-12] (introduced 10/2/2008)      Cosponsors (None)

S.3679: A bill to amend the Internal Revenue Code of 1986 to expand the credit for renewable electricity production to include electricity produced from biomass for on-site use.
Sponsor: Sen Dole, Elizabeth [NC] (introduced 10/2/2008)      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
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