Daily Tax Update- October 10, 2008

THE DAILY TAX UPDATE WILL BE PUBLISHED ON A PERIODIC BASIS UNTIL CONGRESS RETURNS JANUARY 4, 2009.

PRESIDENT BUSH --“WE CAN SOLVE THIS CRISIS AND WE WILL”:  Today, President Bush discussed the economy. The President said, “Here's what the American people need to know: that the United States government is acting; we will continue to act to resolve this crisis and restore stability to our markets. We are a prosperous nation with immense resources and a wide range of tools at our disposal. We're using these tools aggressively. . .The federal government has a comprehensive strategy and the tools necessary to address the challenges in our economy. Fellow citizens: We can solve this crisis – and we will.” The President continued, “The plan we are executing is aggressive. It is the right plan.  It will take time to have its full impact.  It is flexible enough to adapt as the situation changes.  And it is big enough to work.  The federal government will continue to take the actions necessary to restore stability to our financial markets and growth to our economy.”  The President added, “This is an anxious time, but the American people can be confident in our economic future. We know what the problems are, we have the tools we need to fix them, and we're working swiftly to do so. Our economy is innovative, industrious and resilient because the American people who make up our economy are innovative, industrious and resilient. We all share a determination to solve this problem – and that is exactly what we're going to do.”

• The President’s remarks can be accessed here. 

DEMOCRATS CONSIDERING ANOTHER ECONOMIC STIMULUS PACKAGE:  The Democratic leadership in Congress is “seriously considering” a large fiscal stimulus proposal that would provide a significant amount of money to states and cities. 

• House Financial Services Committee Chairman Barney Frank said, “We have to prop up consumption.” The new stimulus package under consideration is said to provide tax relief in some form for families, an extension of unemployment insurance benefits, and provide for an expansion of the food stamp program. The new stimulus plan under consideration would provide as much as $150 billion to states and cities. 
• On Monday, House Democratic leaders will hold a forum with leading economists in an effort to build bipartisan support for passing a stimulus package this year. Yesterday, House Speaker Nancy Pelosi said, “Just as the president and Congress worked together in recent weeks on an economic rescue plan to help bring stability to our financial markets, we must now take additional action and pass a jobs creation and economic recovery stimulus plan.” Congress would have to return after the election to act on the new stimulus plan.

MISCELLANEOUS GUIDANCE ISSUED THIS WEEK:
Notice 2008-98 (released today) provides that the IRS and Treasury intend to amend the normal retirement age regulations to change the effective date for governmental plans to plan years beginning on or after January 1, 2011. This will give governmental plans two additional years to comply with the requirements in the normal retirement age regulations.

Notice 2008-96 (released today) updates and amplifies the procedures for the allocation of credits under the qualifying advanced coal program of § 48A of the Internal Revenue Code. The notice provides that except as specifically provided in this notice, the allocation round for 2008-09 will be conducted in the same manner and under the same procedures as provided under Notice 2007-52.

Notice 2008-97 (released today) provides that the amount of credit available under the qualifying gasification project program of § 48B of the Internal Revenue Code has been allocated in the allocation rounds conducted in 2006 and in 2007-08. Accordingly, the notice provides that no allocation of credits will be conducted in 2008-09 under the qualifying gasification project program.

Notice 2008-93 (released October 8th) provides guidance as to the corporate bond weighted average interest rate and the permissible range of interest rates specified under § 412(b)(5)(B)(ii)(II) of the Internal Revenue Code. It also provides guidance on the corporate bond monthly yield curve (and the corresponding spot segment rates), the 24-month average segment rates, and the funding transitional segment rates under § 430(h)(2). In addition, this notice provides guidance as to the interest rate on 30-year Treasury securities under § 417(e)(3)(A)(ii)(II) as in effect for plan years beginning before 2008, and the minimum present value segment rates under § 417(e)(3)(D) as in effect for plan years beginning after 2007.

Notice 2008-92 (released October 7th) provides that the Treasury Department and the Internal Revenue Service (IRS) will not assert that participation in the Temporary Guarantee Program for Money Market Funds (the Program) by an Insurance-Dedicated Money Market Fund causes a violation of the diversification requirements of § 817(h) of the Internal Revenue Code in the case of any segregated asset account that invests in the fund. In addition, the Notice provides that the Treasury Department and the IRS will not assert that such a fund’s participation in the Program causes the holder of a variable contract supported by a segregated asset account that invests in the fund to be treated as an owner of the fund. The Notice was initiated as a result of certain practitioners expressing concern that participation in the Program may raise tax issues for money market funds whose beneficial interests are held exclusively by one or more segregated asset accounts of one or more insurance companies (or other investors permitted under § 1.817-5(f)(3) of the Income Tax Regulations).

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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