Daily Tax Update - October 13, 2009

FINANCE COMMITTEE APPROVES HEALTH PLAN: Today, the Senate Finance Committee approved an $829 billion health insurance reform package by a vote of 14-9. All of the committee's Democrats voted in favor of the legislation while only one Republican, Sen. Olympia Snowe (R-Maine), supported it.

• The legislation includes a 40-percent excise tax on gold-plated insurance plans, or insurance plans with premiums in excess of $8,000 for individuals and $21,000 for families. A higher threshold is permitted for individuals older than 55 and those who work in professions designated as high-risk. Other tax provisions include: (1) a $2,500 cap on flexible spending account contributions; (2) a penalty excise tax on adults who do not purchase health insurance beginning in 2014; (3) an increase in the floor for medical deduction expenses from 7.5 percent to 10 percent of adjusted gross income, with a carveout for those 65 and older; and (4) tax credits to families earning up to 400 percent of the federal poverty line in order to make it less expensive for such individuals to purchase health insurance.
• The Finance legislation must now be combined with a bill approved by the Senate Health, Education, Labor, and Pensions Committee, a process that has already begun, but it is not yet clear when a bill could come to the Senate floor.
• A summary of the Finance bill can be accessed here.  

HOUSE PASSES BILL TO HELP SERVICE MEMBERS TAKE FULL ADVANTAGE OF HOMEBUYER TAX CREDIT: Today, the House unanimously passed the Service Members Home Ownership Tax Act of 2009 (H.R. 3590), which would extend the homebuyer tax credit included in the American Recovery and Reinvestment Tax Act of 2009 to service members (i.e., members of the uniformed services, members of the Foreign Service, and intelligence employees).

• Chairman Rangel remarked, “This bill makes sure that the brave men and women who put their lives on the line every day get to enjoy the same benefits as every other American who benefits from their service. By extending the first-time homebuyer tax credit for service members overseas, we give these families more time to utilize the benefit, while also helping our economy continue its recovery. I thank my colleagues for supporting this important legislation and look forward to working with the Senate to deliver this bill to President Obama for his signature.”

IRS CREATES NEW WEB-BASED TOOL TO HELP SMALL BUSINESSES WITH PENSION PLANS:  Today, the IRS released the IRS Retirement Plan Navigator, a web-based guide for employers that focuses on three areas: choosing a plan, maintaining a plan, and correcting a plan. The Navigator includes a side-by-side comparison of pension plans and their requirements and provides a checklist and suggested resources for maintaining compliance.

SUPREME COURT DENIES REVIEW IN THREE TAX CASES:  Today, the US Supreme Court declined to review three tax cases: (1) Smith v. United States, US No. 09-23, a 10th Circuit ruling that a corporation's general manager, who was not a stockholder, was responsible for the company's unpaid employment taxes; (2)  Barrett v. United States, US No. 09-32, another 10th Circuit ruling in which the court found the chairman of a tribe of American Indians was not exempt from federal income tax; and (3) Bert v. Comptroller of the Treasury of Maryland, US No. 09-295, a Maryland Appeals Court ruling in which a taxpayer challenged a personal income tax assessment.

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.

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