Daily Tax Update - May 25, 2010

LEVIN DOESN’T FORESEE CHANGES TO CARRIED INTEREST PROVISION: Today, House Ways and Means Committee Chairman Sander Levin said that he doesn't expect any changes to the carried interest provision in the extenders bill. Levin said, “This is a compromise and I don't foresee any change in it.” Levin added, “We've already worked hard to balance all of the needs here.”

• On the issue of the offset provision in the bill designed to prevent splitting foreign tax credits from income, Levin said that “manipulation of the Code really hurts American jobs and American workers and what it does is to incentivize growth in foreign countries at a time when we need to have growth here at home.”
• It is unclear when the bill will be brought before the House floor. If the Senate makes any changes to the bill, it will have to be brought back before the House again.

BUSINESS GROUPS EXPRESS OPPOSITION TO INTERNATIONAL OFFSETS IN EXTENDERS BILL: Yesterday, the PACE Coalition, which includes the Business Roundtable, the Information Technology Industry Council, the National Association of Manufacturers, the National Foreign Trade Council and the US Chamber of Commerce, wrote a letter to Members of Congress expressing opposition to the new proposed international tax increases in the extenders bill. 

• Their letter states, “The proposed $14 billion in proposed tax increases included in H.R. 4213 do entirely the opposite and unilaterally disadvantage US companies. American global companies already struggle under a worldwide tax system and [have] one of the highest corporate tax rates in the world. The proposed changes in the international tax rules will make a bad situation worse, making it even more difficult for American worldwide companies to compete.”
• The letter continues, “More specifically, our objections to the international tax offsets to H.R. 4213 as proposed on May 20 include the following:
• The bill contains eight significant international tax provisions raising $14 billion that should properly be included only in a discussion of fundamental tax reform at which time in depth consideration of the best tax system for the future with a more competitive rate could be considered.
• The bill lists these provisions as “loophole closers” — however, the legislation would affect significant changes in long-standing aspects of US tax law and policy, overturning court decisions and going far beyond.
• The bill attempts to "perfect" our current worldwide international tax system without understanding the current uncompetitive state of that system.
• Several international provisions are new, never having been considered in hearings or other bills, and they are applied on a retroactive basis.
• The retroactive tax increases run contrary to principles of fairness and due process. Such unpredictability undermines confidence in the tax system, and could have large financial statement impacts.”
• The letter can be accessed here.

MISCELLANEOUS GUIDANCE RELEASED TODAY:
Notice 2010-42 announces the phase-out of the new qualified hybrid motor vehicle credit and the new advanced lean burn technology motor vehicle credit for passenger automobiles and light trucks manufactured by Volkswagen Group of America that are purchased for use or lease in the United States beginning on July 1, 2010.

TAX BILLS INTRODUCED MAY 24^TH
H.R.5372: To amend the Internal Revenue Code of 1986 to treat any business credit attributable to wind, solar, or biomass electricity production and investment in solar energy property as refundable to the extent the taxpayer makes new wind, solar, and other renewable energy investments.
Sponsor: Rep Meek, Kendrick B. [FL-17] (introduced 5/24/2010)      Cosponsors (2)

S.3398: A bill to amend the Internal Revenue Code of 1986 to extend the work opportunity credit to certain recently discharged veterans.
Sponsor: Sen Baucus, Max [MT] (introduced 5/24/2010)      Cosponsors (1)

S.3405: A bill to amend the Internal Revenue Code of 1986 to eliminate oil and gas company preferences.
Sponsor: Sen Menendez, Robert [NJ] (introduced 5/24/2010)      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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