Daily Tax Update - September 9, 2011: Obama Proposes $447 Billion Jobs Package

OBAMA PROPOSES $447 BILLION JOBS PACKAGE WITH PAYROLL TAX CUT:  Last night, in a Joint Session of Congress, President Obama outlined a jobs creation plan that contains a mix of tax cuts, tax credits, and infrastructure investments.  While the President did not specify how the jobs plan would be paid for, he called on the new deficit reduction Super Committee to come up with "additional deficit reduction necessary to pay for the Act." 

  • The President said, "I am sending this Congress a plan that you should pass right away.  It’s called the American Jobs Act.  There should be nothing controversial about this piece of legislation.  Everything in here is the kind of proposal that’s been supported by both Democrats and Republicans -- including many who sit here tonight.  And everything in this bill will be paid for.  Everything."  The President added, "The purpose of the American Jobs Act is simple:  to put more people back to work and more money in the pockets of those who are working.  It will create more jobs for construction workers, more jobs for teachers, more jobs for veterans, and more jobs for long-term unemployed.  It will provide -- it will provide a tax break for companies who hire new workers, and it will cut payroll taxes in half for every working American and every small business.  It will provide a jolt to an economy that has stalled, and give companies confidence that if they invest and if they hire, there will be customers for their products and services.  You should pass this jobs plan right away. "  The President continued, "I am also -- I’m also well aware that there are many Republicans who don’t believe we should raise taxes on those who are most fortunate and can best afford it.  But here is what every American knows:  While most people in this country struggle to make ends meet, a few of the most affluent citizens and most profitable corporations enjoy tax breaks and loopholes that nobody else gets.  Right now, Warren Buffett pays a lower tax rate than his secretary -- an outrage he has asked us to fix.  We need a tax code where everyone gets a fair shake and where everybody pays their fair share.  And by the way, I believe the vast majority of wealthy Americans and CEOs are willing to do just that if it helps the economy grow and gets our fiscal house in order.  I’ll also offer ideas to reform a corporate tax code that stands as a monument to special interest influence in Washington.  By eliminating pages of loopholes and deductions, we can lower one of the highest corporate tax rates in the world.  Our tax code should not give an advantage to companies that can afford the best-connected lobbyists.  It should give an advantage to companies that invest and create jobs right here in the United States of America."   
  • House Ways and Means Committee Chairman Dave Camp said in response to the President's speech:  "I appreciate the President’s focus on the economy and the need to get Americans working again.  Where we agree – like the need to pass the long pending, job creating trade agreements – we should act and act now . . . .  However, I was disappointed that the President did not discuss the one area that can truly spark sustained private-sector job creation in this country – comprehensive tax reform.  Given job creation stood at zero last month and roughly 14 million Americans remain out of work, I hope the President is not backing away from his support for one of the boldest actions that Washington can take to get America back on track.  In the months ahead I look forward to reviewing the details of the President’s proposals and working with the Administration and my colleagues in the House and Senate on pro-growth policies that get America’s employers hiring again and workers back on the job." 
  • The tax provisions in the President's plan include: 
    • Cutting the payroll tax in half for 98 percent of businesses:  The President’s plan will cut in half the taxes paid by businesses on their first $5 million in payroll, targeting the benefit to the 98 percent of firms that have payroll below this threshold.  
    • A complete payroll tax holiday for added workers or increased wages:  The President’s plan will completely eliminate payroll taxes for firms that increase their payroll by adding new workers or increasing the wages of their current worker (the benefit is capped at the first $50 million in payroll increases).  
    • Extending 100% expensing into 2012:  This continues an effective incentive for new investment.  
    • Reforms and regulatory reductions to help entrepreneurs and small businesses access capital.  
    • A “Returning Heroes” hiring tax credit for veterans:  This provides tax credits from $5,600 to $9,600 to encourage the hiring of unemployed veterans.  
    • A $4,000 tax credit to employers for hiring long-term unemployed workers.  
    • Cutting payroll taxes in half for 160 million workers next year:  The President’s plan will expand the payroll tax cut passed last year to cut workers payroll taxes in half in 2012 – providing a $1,500 tax cut to the typical American family, without negatively impacting the Social Security Trust Fund.  
    • Fully Paid for as Part of the President’s Long-Term Deficit Reduction Plan:  To ensure that the American Jobs Act is fully paid for, the President will call on the Joint Committee to come up with additional deficit reduction necessary to pay for the Act and still meet its deficit target.  The President will, in the coming days, release a detailed plan that will show how we can do that while achieving the additional deficit reduction necessary to meet the President’s broader goal of stabilizing our debt as a share of the economy.  
  • Additional information can be accessed via: http://www.whitehouse.gov/the-press-office/2011/09/08/fact-sheet-american-jobs-act.

MISCELLANEOUS GUIDANCE RELEASED TODAY:

Notice 2011-75 provides guidance as to the corporate bond weighted average interest rate and the permissible range of interest rates specified under § 412(b)(5)(B)(ii)(II) of the Internal Revenue Code as in effect for plan years beginning before 2008. It also provides guidance on the corporate bond monthly yield curve (and the corresponding spot segment rates), and the 24-month average segment rates under § 430(h)(2). In addition, this notice provides guidance as to the interest rate on 30-year Treasury securities under § 417(e)(3)(A)(ii)(II) as in effect for plan years beginning before 2008, the 30-year Treasury weighted average rate under § 431(c)(6)(E)(ii)(I), and the minimum present value segment rates under § 417(e)(3)(D) as in effect for plan years beginning after 2007.

TAX BILLS INTRODUCED SEPTEMBER 8TH:

1. [112nd] H.R.2866 : To amend the Internal Revenue Code of 1986 to provide a tax incentive for the installation and maintenance of mechanical insulation property.
Sponsor: Rep Manzullo, Donald A. [IL-16] (introduced 9/8/2011) Cosponsors (11)
Committees: House Ways and Means
Latest Major Action: 9/8/2011 Referred to House committee. Status: Referred to the House Committee on Ways and Means.

2. [112nd] H.R.2868 : To amend the Internal Revenue Code of 1986 to provide payroll tax relief to encourage the hiring of unemployed individuals, and for other purposes.
Sponsor: Rep Dold, Robert J. [IL-10] (introduced 9/8/2011) Cosponsors (None)
Committees: House Ways and Means
Latest Major Action: 9/8/2011 Referred to House committee. Status: Referred to the House Committee on Ways and Means.

3. [112nd] H.R.2873 : To amend the Internal Revenue Code of 1986 to provide a credit to employers for the retention of certain individuals hired before 2013.
Sponsor: Rep Velazquez, Nydia M. [NY-12] (introduced 9/8/2011) Cosponsors (None)
Committees: House Ways and Means
Latest Major Action: 9/8/2011 Referred to House committee. Status: Referred to the House Committee on Ways and Means.

4. [112nd] S.1526 : A bill to amend the Internal Revenue Code of 1986 to provide a tax incentive for the installation and maintenance of mechanical insulation property.
Sponsor: Sen Gillibrand, Kirsten E. [NY] (introduced 9/8/2011) Cosponsors (1)
Committees: Senate Finance
Latest Major Action: 9/8/2011 Referred to Senate committee. Status: Read twice and referred to the Committee on Finance.

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
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