Daily Tax Update - May 16, 2011: US Hits Debt Ceiling Limit
US HITS DEBT CEILING LIMIT: Today, the US officially hit its $14.3 trillion debt ceiling limit. Treasury Secretary Timothy Geithner informed lawmakers of specific steps he was taking to avoid a default. Geithner’s letter to Congressional leaders said, "For purposes of this statute, I have determined that a ‘debt issuance suspension period’ will begin today, May 16, 2011, and last until August 2, 2011, when the Department of the Treasury projects that the borrowing authority of the United States will be exhausted during this ‘debt issuance suspension period.’" According to the Treasury Department, "The Secretary declared a ‘debt issuance suspension period’ for the Civil Service Retirement and Disability Fund, permitting Treasury to redeem a portion of existing Treasury securities held by that fund as investments and suspend issuance of new Treasury securities to that fund as investments. He also suspended the daily reinvestment of Treasury securities held as investments by the Government Securities Investment Fund of the Federal Employees’ Retirement System Thrift Savings Plan." Geithner’s letter continued, "I have written to Congress on previous occasions regarding the importance of timely action to increase the debt limit in order to protect the full faith and credit of the United States and avoid catastrophic economic consequences for citizens. I again urge Congress to act to increase the statutory debt limit as soon as possible."
- Yesterday, House and Senate Republican leaders appeared optimistic that an agreement could be reached on raising the debt ceiling. House Speaker John Boehner said, "I would hope so, and I think we will. I understand what the president was saying about jeopardizing the full faith and credit of the United States. That’s why I have said in every public and private utterance that our obligation is to raise the debt ceiling. But to raise the debt ceiling without dealing with the underlying problems is totally irresponsible." Boehner added, "I’ve talked to the president all year privately about the fact that we’re not going to increase the debt limit without serious changes. I mean, this conversation’s been going on for quite a while. I’ve offered to the president, I’ve said, ‘Mr. President, c’mon. You and I. Let’s lock arms and we’ll jump out of the boat together.’ I’m serious about dealing with this, and I hope he’s just as serious. No gimmicks."
- Senate Minority Leader Mitch McConnell said, "Some of our biggest accomplishments in the last century have been when we have a divided government. Rather than thinking of this as a crisis, I think of this as an opportunity to come together, and those talks are under way led by the vice president."
- Vice President Joe Biden and Congressional Republicans will continue a series of budget negotiations in the coming weeks. However, members of the House Tea Party Caucus have said that they will not vote to support a deal that would expand the government's credit limits without concessions on federal spending.
- Today, House Ways and Means Chairman Dave Camp said, "It comes as no surprise that Washington's spending spree has resulted in us once again reaching the statutory debt limit. The American people have no interest in simply increasing the limit absent serious steps to rein in spending. I urge the Administration to demonstrate the leadership America expects from Washington and work with the Congress to enact significant reductions in government spending — including entitlement programs like Medicare — as well as needed structural reforms to how Washington sets the nation's budget."
- Geithner’s letter can be accessed here.
MISCELLANEOUS GUIDANCE RELEASED TODAY:
Revenue Ruling 2011-12 provides the rates for interest on tax overpayments and underpayments for the calendar quarter beginning July 1, 2011. The interest rates will be 4 percent for overpayments (3 percent in the case of a corporation), 4 percent for underpayments, 1 and one-half percent for the portion of a corporate overpayment exceeding 10,000, and 6 percent for large corporate underpayments. This quarterly determination is required by section 6621 of the Internal Revenue Code.
TAX BILL INTRODUCED MAY 13TH:
H.R.1893: To amend the Internal Revenue Code of 1986 to extend the funding and expenditure authority of the Airport and Airway Trust Fund, to amend title 49, United States Code, to extend the airport improvement program, and for other purposes.
Sponsor: Rep Mica, John L. [FL-7] (introduced 5/13/2011) Cosponsors (6)
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.
- Learn more about the members of the tax practice group.