Daily Tax Update - December 19, 2005

Friday afternoon, the IRS and Treasury Department issued Notice 2006-2 which extends by one year the moratorium on the application of Section 470 to certain property held by partnerships and other pass-thru entities.

  • According to the IRS, "This provision of the 2004 law generally addresses leases of property in sale-in, lease-out transactions involving tax-exempt entities by suspending the deduction for ‘tax-exempt use losses’ on ‘tax-exempt use property.’ This new provision also applies to certain property held by partnerships with tax-exempt owners and therefore described in Section 168(h)(6). Notice 2005-29, released in March 2005, announces that the IRS will not apply Section 470 to partnerships or other pass-thru entities for taxable years beginning before January 1, 2005, for property that is treated as tax-exempt use property solely as a result of the application of Section 168(h)(6)."
  • Notice 2006-2 extends this moratorium to taxable years beginning before January 1, 2006.
  • The notice can be accessed here.
  • For additional information, contact Mark J. Silverman via email or Aaron P. Nocjar via email.

CONGRESS SENDS HURRICANE RELIEF TAX BILL TO THE PRESIDENT: On December 16, both the House and Senate passed the hurricane relief tax incentives bill (H.R. 4440) aimed at providing economic recovery to the Gulf Coast. The bill contains a provision to deny the tax benefits to such businesses as casinos, racetracks and other "sin" businesses. However, the bill would allow facilities attached to casinos, including restaurants, hotels and parking lots, to claim the tax relief. The bill also makes several technical corrections to the American Jobs Act and other tax laws and includes several non-controversial tax cut extensions. The President is expected to sign the bill into law in the next few days.

  • A summary of the bill can be accessed here.
  • Today, the House adjourned after finishing its legislative work including passing the $39.7 billion spending reconciliation package. The Senate remains in session to work on the Defense appropriations bill and several other key issues. It is uncertain whether the Senate will hold a post-Christmas session to complete its unfinished business.
  • The conference to resolve the differences between the House and Senate tax reconciliation bills will not commence until sometime in early 2006.


  • S. 2122 sponsored by Sen. Johnny Isakson (R-GA) would terminate the Internal Revenue Code of 1986.
  • S. 2139 sponsored by Sen. John Rockefeller, IV (D-WV) would simplify the earned income tax credit eligibility requirements regarding filing status, presence of children, investment income, and work and immigrant status.

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.

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