Daily Tax Update - October 19, 2009

BAUCUS, GRASSLEY SUPPORT RECOMMENDATION FOR REPORTS ON TAXABLE FOREIGN-SOURCE INCOME: Senate Finance Committee Chairman Max Baucus and Ranking Member Charles Grassley commented on a new GAO study on countries that exempt foreign-source income. The Finance leaders commissioned the study in anticipation of tax reform and in consideration of the worldwide and territorial approaches to taxation. 

• Baucus said, “This report makes clear there are significant inherent challenges in international tax policy reform, and the complexity of the issues requires us to move carefully and thoughtfully. Any tax reform must be focused on a healthy economy, job growth and increased US competitiveness worldwide.” Baucus added, “We are committed to ensuring American competitiveness abroad and job-creation here at home while promoting fairness, efficiency and simplicity in tax reform. I urge Treasury to address the recommendation in this report right away, to help us better understand the implications of international tax policies on domestic companies with international operations and on the US tax base. This information could play an important role as Congress looks toward overall tax reform.”
• Grassley said, “This report sheds light on the territorial, or exemption, system of corporate international taxation. That’s very different from the current US system of deferral. This report underscores that US international taxation is complex. It shouldn’t be changed without thorough review and consideration by the Finance Committee, and shouldn’t be done through the use of simplistic, rigid, and inaccurate ‘black lists’ of disfavored countries. When the Finance Committee does take up corporate international tax reform, any changes should maximize US economic well-being. Transactions shouldn’t be based on tax avoidance. Changing the game on multinational corporations doesn’t make sense if it means companies will ship more jobs overseas to avoid what they see as unfair or anti-competitive US tax rules.”
• The GAO report found that none of the countries studied – including Australia, Canada, France, Germany and the Netherlands – were able to provide quantitative estimates of the extent of unpaid taxes on foreign-source income, or the amount of time and resources spent on taxpayer compliance with current law. The US Department of the Treasury agreed to begin reporting revenue generated by taxing foreign-source corporate income as part of their Statistics of Income data reporting.

MISCELLANEOUS GUIDANCE ISSUED TODAY:
Revenue Ruling 2009-35 provides various prescribed rates for federal income tax purposes including the applicable federal interest rates, the adjusted applicable federal interest rates, the adjusted federal long-term rate, the adjusted federal long-term tax-exempt rate. These rates are determined as prescribed by § 1274. The rates are published monthly for purposes of sections 42, 382, 412, 1288, 1274, 7520, 7872, and various other sections of the Internal Revenue Code.

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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