Daily Tax Update - July 11, 2006

IRS ISSUES INTERIM GUIDANCE OUTLINING CHANGES TO OFFERS IN COMPROMISE PROGRAM:
Today, the IRS announced (Notice 2006-68) that taxpayers submitting new offers in compromise must make a 20 percent nonrefundable, up-front payment in many cases. An offer in compromise is an agreement between a taxpayer and the IRS that resolves the taxpayer's tax debt. The IRS has the authority to settle, or "compromise," federal tax liabilities by accepting less than full payment in certain circumstances.

  • The recently-enacted Tax Increase Prevention and Reconciliation Act of 2005 (TIPRA) made major changes to the offer in compromise (OIC) program, tightening the rules for lump-sum offers and periodic-payment offers. These changes become effective for all offers received by the IRS starting July 16, 2006. Comments on these changes are due by October 9.
  • The IRS stated that:
    • Taxpayers submitting lump-sum offers must make a 20 percent nonrefundable, up-front payment to the IRS;
    • Taxpayers submitting a periodic-payment OIC must make a nonrefundable, up-front payment, plus any other proposed payments that may be due, while the IRS is evaluating the offer; and
    • An OIC application is deemed accepted if the IRS fails to act upon it within two years.
  • Additional information can be accessed here.

IRS HEADQUARTERS WILL REMAIN CLOSED FOR MONTHS:
Today, the IRS and the General Services Administration announced that the complete IRS building restoration won’t be complete until about the first of the year due to extensive damage the building’s infrastructure sustained during last month’s heavy rainfall.  The IRS said that "critical parts of the building’s electrical system and heating and air conditioning systems were destroyed or heavily damaged during the record rainfall." The IRS also stated that it has "implemented business resumption processes to continue tax administration operations."

  • IRS Commissioner Mark Everson said, "We successfully implemented our Continuation of Operations (COOP) plan and all critical employees were back to work within two weeks.  Both across the country and here in Washington, the IRS is on the job. I appreciate the efforts of all our employees during this period and ask them to bear with us as we bring them back on line and restore the building to a safe and usable condition."
  • Additional information can be accessed here.

SENATE ESTATE TAX BILL OUTLOOK REMAINS UNCLEAR:
Yesterday, Senate Majority Leader Bill Frist (R-TN) said that the Senate is still searching for bipartisan support for a "permanent solution" to the estate tax. The Majority Leader did not specify if the Senate would act before the month-long August recess. Frist said, "In terms of whether or not we can do it over the next three-and-a-half weeks depends on participation from the other side of the aisle."

TAX BILL INTRODUCED JULY 10:

  • H.R. 5751 sponsored by Rep. Ted Poe (R-TX) would allow employers a credit against income tax equal to 50 percent of the compensation paid to employees while they are performing active duty service as members of the Ready Reserve or the National Guard and of the compensation paid to temporary replacement employees.

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