Daily Tax Update - July 10, 2006

PAULSON SWORN IN AS TREASURY SECRETARY:
Today, Henry Paulson was sworn in as the 74th Treasury Secretary. Paulson said, "We must always remember that the strength of the U.S. economy is linked to the strength of the global economy. . . If we retreat from the global stage, the void is likely to be filled by those who do not share our commitment to economic reform."

IRS ANNOUNCES TEMPORARY PROCEDURES FOR CERTAIN EXPEDITED RULING REQUESTS:
Today, the IRS announced that a special procedure for processing requests for certain expedited letter rulings for reorganizations and section 355 distributions has been established.   The IRS requested that taxpayers or their representatives call the office of the Associate Chief Counsel (Corporate) at (202) 283-7930 and ask to speak to an attorney regarding the temporary procedures for submitting these ruling requests. The IRS established a pilot program for processing requests for letter rulings for reorganizations and section 355 distributions on an expedited basis, provided certain requirements were met.  The IRS issued another reminder that the temporary address for courier delivery of these requests, which are typically hand delivered, is: IRS, 950 L’Enfant Plaza, Fifth Floor, Washington, D.C. 20024.  All requests that are not hand delivered should continue to be sent to the Post Office Box specified in the revenue procedures.

TREASURY DEPARTMENT ISSUES NEW LIST OF COUNTRIES PARTICIPATING IN ARAB BOYCOTT OF ISRAEL:
On July 7, the U.S. Department of the Treasury published its new list of countries that engage in an unsanctioned international boycott of a country friendly to the United States, specifically, the Arab boycott of Israel, as required pursuant to section 999 of the Internal Revenue Code of 1986. See 71 Fed. Reg. 38,688 (July 7, 2006). The Treasury Department is supposed to issue the list (and any revisions thereto) every calendar quarter, but the last time the list appeared was December 2004. For US taxpayers, this list identifies those countries for which a report on operations in such countries is required on IRS Form 5713 at the time of filing an annual tax return. The list also is a useful tool (although not dispositive) in determining where boycott-related requests are likely to arise.

  • The newly-issued list identifies Kuwait, Lebanon, Libya, Qatar, Saudi Arabia, Syria, the United Arab Emirates, and the Republic of Yemen as boycotting countries. Of note, the revised list does not include Oman or Bahrain, which appeared on the previous list. T he notice indicates these countries were omitted due to actions by their governments, presumably their efforts to not participate in the Arab boycott of Israel. While Iraq is not listed, Treasury indicates its status remains under review.
  • If you have any questions regarding the U.S. anti-boycott regulations or the new list, please contact Stan Smilack at 202-429-6464 or Ed Krauland at 202-429-8083.

IRS COMPUTER SERVERS DAMAGED BY RECENT FLOODING:
The recent flooding at the IRS headquarters building caused damage to some of its servers, but the IRS stated that it has salvaged the data stored in the computers. An IRS spokesman said last week, "There were some servers in the basement, but the drives were removed and reconstituted, and no data was lost." The IRS spokesman said that field offices "are somewhat affected by the computer problems" and they may have a slower turnaround on the numerous briefs that require review from the national office. The main headquarters building could remain closed beyond July. The spokesman said, "We don't really have a timetable for that yet. It will take at least to the end of the month, but it could go well beyond that."

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