Daily Tax Update - June 28, 2006

FRIST POSTPONES ESTATE TAX BILL VOTE:
Yesterday, Senate Majority Leader Bill Frist (R-TN) announced that the Senate would not vote on a House-passed estate tax "compromise" bill before the July 4th recess. However, Frist said that a vote would occur on permanent estate tax legislation eventually. Frist said, "The House of Representatives made tremendous progress last week toward achieving a permanent solution to the death tax. Now it's up to the Senate to decide whether it can improve upon the House bill or whether this is the bill that should be sent to the President for his signature. Everyone should be clear: The Senate will vote on a permanent reduction to this tax - a tax that destroys small businesses and family farms. The vast majority of my Democratic colleagues have so far refused to address this issue; it's my hope that their constituents will use the upcoming recess to explain the importance of supporting a reasonable and permanent solution to this unfair tax."

FINANCE COMMITTEE APPROVES TELEPHONE EXCISE TAX REPEAL ACT:
Today, the Senate Finance Committee passed a telephone excise tax repeal bill. The bill would prevent the IRS from collecting taxes on both local and long-distance telephone service. Last month, the IRS announced that it would no longer collect the tax on long-distance service.

  • The Taxpayer Protection and Assistance Act of 2005 and several other provisions were attached to the bill as an amendment. The bill also contains a provision which requires that a corporation's Federal income tax return include a declaration signed under penalties of perjury that the corporation has in place processes and procedures to ensure that the return complies with the Code and that the CEO was provided reasonable assurance of accuracy of all material aspects of the return. It does not change who is required to sign the return. The bill also contains two revenue offsets including codification of the economic substance doctrine and a provision dealing with the tax treatment of certain inverted corporate entities.
  • A description of the bill by the Joint Committee on Taxation can be accessed here.

IRS HEADQUARTERS TO REMAIN CLOSED ALL WEEK:
The headquarters building of the IRS will remain closed the rest of this week due to "significant damage" caused by flooding. An IRS spokesman said yesterday, "We'll continue assessing the situation. We have not had a situation like this in 20 years. The building sustained significant damage in the basement. Before we can open, we need to have our electrical system and air conditioning working." The spokesman added, "We're continuing our tax administration work. The tax system continues to operate." The building is expected to reopen July 3rd.

TAX BILLS INTRODUCED JULY 27:

  • S. 3583 sponsored by Sen. Olympia Snowe (R-ME) would regulate payroll tax deposit agents.
  • S. 3585 sponsored by Sen. Orrin Hatch (R-UT) would improve and expand the availability of health savings accounts.
  • S. 3586 sponsored by Sen. Orrin Hatch (R-UT) would repeal the dollar limitation on contributions to funeral trusts.

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