Daily Tax Update - November 5, 2009

HOUSE SUBCOMMITTEE HOLDS HEARING ON FOREIGN BANK ACCOUNT REPORTING AND TAX COMPLIANCE: Today, the House Ways and Means Subcommittee on Select Revenue Measures held a hearing focusing on non-compliance by US taxpayers with foreign bank accounts, rules regarding foreign trusts with US beneficiaries, and the use of certain US dividend equivalent payments by foreign persons to avoid US withholding taxes. The hearing also discussed recently introduced legislation, H.R. 3933, the Foreign Account Tax Compliance Act of 2009.

• Stephen Shay, Deputy Treasury Assistant Secretary for International Tax Affairs, said: “The Foreign Account Tax Compliance Act of 2009 (H.R. 3933 and S.1934) represents an important step toward reducing the amount of taxes lost through illegal use of hidden accounts and making sure that everyone pays their fair share.” Shay also discussed the Administration’s budget request, which includes legislative proposals “directed at enhancing information reporting, strengthening penalties, and making it harder for foreign accountholders to evade US taxes.” Shay said the legislation would “make it more difficult for taxpayers to hide behind foreign trusts and it will prevent taxpayers who receive the benefit of US-source dividend payments from avoiding US withholding taxes.”
• IRS Chief Counsel William Wilkins also testified. Wilkins said: “We strongly support this important legislation that, if enacted, would provide the IRS with additional tools to address offshore tax evasion by US persons who hide unreported income and assets in offshore accounts. The Foreign Account Tax Compliance Act would aid the IRS in its mission to ensure that that all businesses and individuals are playing by the rules and paying their fair share of taxes.” Wilkins also discussed the voluntary disclosure initiative and FBAR. Wilkins said, “A key aspect of our future international offshore work will be mining the voluntary disclosure information from people who have come forward. We will be scouring this information to identify financial institutions, advisors, and others who promoted or otherwise helped US taxpayers hide assets and income offshore and skirt their tax responsibilities at home. In addition, we are increasing our scrutiny of annual foreign bank and financial account reports (Treasury Department Form TD F90-22.1, “Report of Foreign Bank and Financial Accounts," or “FBAR”). Current law requires that US taxpayers file an FBAR if their foreign financial accounts total more than $10,000. But current rules make it difficult to catch taxpayers who do not file a required FBAR. Our focus today is on ending offshore noncompliance by US individuals. The bill will provide the IRS welcome tools toward that goal.”
• For additional information, contact Philip R. West - pwest@steptoe.com
• Testimony can be accessed here. 
• The Joint Committee on Taxation’s background report on the hearing can be accessed here.

OBAMA VISITS HILL TO RALLY DEMOCRATS: Today, President Obama visited House Democrats in advance of Saturday’s House vote on its $1.2 trillion health care reform bill. 

• The bill must obtain 218 votes in the House to pass. Today, House  Majority Leader Steny Hoyer predicted the bill would pass. Hoyer said, “I wouldn't refer to it as a squeaker, but I think it's going to be close.  This is a huge undertaking.” Hoyer added, “We certainly have well over 218 people who say they want to vote for the bill. The trick is making sure they have a comfort level with the provisions they are particularly focused on to allow them to do so. I think that's what we're in the final stages of trying to get to.”

HOUSE AND SENATE PASS UNEMPLOYMENT BILL WITH HOME BUYER CREDIT AND NOL CARRYBACK PROVISION: The Worker, Homeownership, and Business Tax Act of 2009 (H.R. 3548) passed by the Senate yesterday contains an unemployment benefit extension, a first-time home buyer credit and a net operating loss carryback provision. The House approved the bill today. The President is expected to sign the bill in the coming days.

• The bill would provide a continuation of the $8,000 first-time home buyer tax credit through April 30, 2010, and would create a new $6,500 tax credit for existing homeowners who want to purchase a different house as their primary residence. The bill also would expand the net operating loss (NOL) carryback provision from the American Recovery and Reinvestment Act to allow any business with a loss in either 2008 or 2009 to claim refunds of taxes paid within the prior five years. Offsets in the bill include a six-year delay of the implementation of a tax break on worldwide interest allocation slated for use by multinational firms and increased penalties for failure to file S corporation and partnership tax returns. 

TAX BILLS INTRODUCED NOVEMBER 4th:
H.R.4015: To amend the Internal Revenue Code of 1986 to extend certain estate tax provisions and restore and increase the estate tax deduction for certain family-owned business interests.
Sponsor: Rep McNerney, Jerry [CA-11] (introduced 11/4/2009)      Cosponsors (1)

S.2728: A bill to amend the Internal Revenue Code of 1986 to provide that the value of certain historic property shall be determined using an income approach in determining the taxable estate of a decedent.
Sponsor: Sen Burr, Richard [NC] (introduced 11/4/2009)      Cosponsors (2)

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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