Daily Tax Update - June 22, 2006

HOUSE PASSES ESTATE TAX RELIEF BILL:
Today, by a vote of 269 to 156, the House approved a bill which would permanently reduce, but not repeal the estate tax. H.R. 5638 would exempt all estates worth less than $5 million per person and would make it easier for taxpayers to pass on the full exemption to a spouse when they die. The bill would tax estates between $5 million and $25 million at the capital gains rate, currently 15 percent, and above $25 million at double the capital gains rate (30 percent). However, Thomas' bill could result in a rate as high as 40 percent if Congress does not extend the lower rates on capital gains and dividends which is scheduled to expire in 2010. Sen. Jon Kyl's (R-AZ) proposal would tax estates worth more than $30 million at 30%.

  • Last night, House Ways and Means Committee Chairman Bill Thomas (R-CA) introduced a manager's amendment with a minor change that would index the $5 million exemption to inflation.
  • Timing and the Senate outlook for passage is still uncertain.
  • A description of Thomas' bill can be accessed here.

WAYS AND MEANS SUBCOMMITTEE HOLDS HEARING ON IMPACT OF INTERNATIONAL TAX REFORM ON U.S. COMPETITIVENESS:
Today, the House Ways and Means Subcommittee on Select Revenue Measures heard testimony from various academic and private sector witnesses on the impact of international tax reform on U.S. competitiveness. Several of the witnesses testified that current U.S. international tax rules should be reviewed to try to reduce their complexity and remove impediments to U.S. international competitiveness. Among the potential solutions discussed by witnesses to enhance U.S. global competitiveness include suggestions for a corporate rate reduction and an investment tax credit.

  • In conjunction with the hearing, the Joint Committee on Taxation has released a report titled, "The Impact Of International Tax Reform: Background And Selected Issues Relating To U.S. International Tax Rules And The Competitiveness Of U.S. Businesses."
  • The document can be accessed here.

TAX BILLS INTRODUCED JUNE 21:

  • H.R. 5660 sponsored by Rep. Rodney Alexander (R-LA) would extend and expand the benefits for businesses operating in empowerment zones, enterprise communities, or renewal communities.
  • H.R. 5662 sponsored by Rep. Michael Fitzpatrick (R-PA) would provide individuals a deduction for certain mass public transportation expenses.

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