Daily Tax Update - May 12, 2010

LEVIN ANTICIPATES PHASED-IN CARRIED INTEREST PROVISION TO BE MAIN OFFSET FOR EXTENDERS PACKAGE: Negotiations continue on a package of expiring tax provisions in the hope of bringing a final bill to the floor before the Memorial Day recess. Yesterday, House Ways and Means Committee Chairman Sander Levin said that he expects a phased-in change to the tax treatment of carried interest to be a main offset to help pay for the bill. Levin also said that he did not expect any industries to be exempt from the carried interest provision. Levin indicated that the proposal they are working on would phase in the tax increase over several years, from the current 15-percent capital gains rate to ordinary income rates. The carried interest provision is expected to raise $20 billion to partially offset the bill's cost. Levin also indicated that no additional hearings would be held on the various provisions in the bill. Levin said, “Most of the provisions have gone through the process. There are a few items that are new, but most are not. I mean, carried interest we passed three times.”

• The newly-titled bill (Promoting American Jobs and Closing Tax Loopholes Act – H.R. 4213) will also include a modified version of the Build America Bonds provision originally in the small business tax incentives bill (H.R. 4849). Levin said that the new bill will include $50 billion in offsets. Democrats are also considering raising the oil spill liability excise tax to help pay for the extenders and the Gulf Coast cleanup and damages.
• Senate Budget Committee Chairman and Finance member Sen. Kent Conrad has been supportive of combining the extenders package, the small business tax package, an AMT patch and an estate tax fix into one bill because of the short legislative timeframe left this session. Conrad said, “You've got 13 legislative weeks. It seems to me it would be wise to put all of the tax measures together."
• House Majority Leader Steny Hoyer said that while there have been some discussions in the Senate about including an AMT patch, it was his intention to move it separately in the House. Hoyer said, “It's being talked about in the Senate, not so much here. We are going to pass the AMT [patch] at some point in time.”
• Meanwhile, Senate Minority Whip Jon Kyl seemed receptive of including an estate tax fix in the small business package and indicated his estate tax proposal was near completion but did not release details. Kyl and Sen. Blanche Lincoln have been working on an estate tax proposal and the necessary offsets to pay for it if the cost exceeds the House-passed estate tax bill. Kyl said, "It is our hope that we can get together both on the proposal, the details are pretty well resolved, and on a process by which we can get it passed as soon as possible.” Kyl added, “Good policy preference is not to have a phase-down or a phase-up of any kind, but if you don't have the offsets to do things immediately, that's one of the options of dealing with that problem.”

TAX BILLS INTRODUCED MAY 11^TH:
H.R.5260: To amend the Internal Revenue Code of 1986 to repeal the phasedown of the credit percentage for the dependent care tax credit.
Sponsor: Rep Schwartz, Allyson Y. [PA-13] (introduced 5/11/2010)      Cosponsors (1)

H.R.5261: To amend the Internal Revenue Code of 1986 to allow a deduction for tutoring expenses for elementary and secondary school students.
Sponsor: Rep McCotter, Thaddeus G. [MI-11] (introduced 5/11/2010)      Cosponsors (None)

H.R.5263: To amend the Internal Revenue Code of 1986 to provide a 5 percent maximum rate of tax on gain from the sale or exchange of depreciable real property by individuals.
Sponsor: Rep Yarmuth, John A. [KY-3] (introduced 5/11/2010)      Cosponsors (None)

H.R.5273: To amend the Internal Revenue Code of 1986 to extend certain tax benefits relating to certain disasters.
Sponsor: Rep Langevin, James R. [RI-2] (introduced 5/11/2010)      Cosponsors (1)

H.R.5277: To amend the Internal Revenue Code of 1986 to allow a business credit for small business loans.
Sponsor: Rep Wilson, Charles A. [OH-6] (introduced 5/11/2010)      Cosponsors (None)

S.3336: A bill to amend the Internal Revenue Code of 1986 to provide for the treatment of bonds issued to finance renewable energy resources facilities, conservation and efficiency facilities, and other specified greenhouse gas emission technologies.
Sponsor: Sen Feinstein, Dianne [CA] (introduced 5/11/2010)      Cosponsors (1)

S.3338: A bill to amend the Internal Revenue Code of 1986 to provide an investment tax credit for advanced biofuel production property.
Sponsor: Sen Nelson, Bill [FL] (introduced 5/11/2010)      Cosponsors (None)

S.3339: A bill to amend the Internal Revenue Code of 1986 to provide a reduced rate of excise tax on beer produced domestically by certain small producers.
Sponsor: Sen Kerry, John F. [MA] (introduced 5/11/2010)      Cosponsors (3)

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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