Daily Tax Update - April 28, 2006

IRS POSTS UPDATED DRAFT INSTRUCTIONS FOR SCHEDULES M-3:
Today, the IRS posted (IR-2006-71) updated draft instructions for Schedules M-3 for the 2006 tax year and an updated draft of the new Form 8916 that will be filed by some insurance-related corporations to reconcile taxable income. Comments on the draft schedules and form remain due by June 1.

  • The updates incorporate changes to an instruction that focuses on the Form 1065 Schedule M-3 requirement to disclose reportable entity partners and a change regarding the cost of goods sold. The updated draft of Form 8916 expands on an initial draft released in early April.
  • Additional information can be accessed here.

AGREEMENT ON TAX RECONCILIATION BILL DELAYED: Although the House and Senate tax reconciliation conferees were expected to reach an agreement yesterday, they were unable to meet that timetable. Conferees are hopeful to conclude action the week of May 1.

  • Although the specifics of the final bill have not been released, the bill is expected to contain a two-year extension of the capital gains and dividends rates, at least a one-year alternative minimum tax patch, an extension of the active financing exception under Subpart F and some revenue raisers to help offset the cost. It is unclear what tax provisions will move outside of reconciliation protection.

TAX BILLS INTRODUCED APRIL 27:

  • H.R. 5218 sponsored by Rep. Jim McDermott (D-WA) would provide that oil and gas companies will not be eligible for the effective rate reductions enacted in 2004 for domestic manufacturers.
  • HR. 5230 sponsored by Rep. Vito Fossella (R-NY) would allow a credit against tax for qualified elementary and secondary education tuition.
  • H.R. 5234 sponsored by Rep. John Larson (D-CT) would repeal certain tax incentives for oil companies.
  • H.R. 5239 sponsored by Rep. John McHugh (R-NY) would increase the credit for certain alternative motor vehicles assembled in the United States.
  • H.R. 5240 sponsored by Rep. John McHugh (R-NY) would suspend the excise tax on highway motor fuels when average United States retail gasoline prices exceed $2.75 per gallon.
  • H.R. 5251 sponsored by Rep. Heather Wilson (R-NM) would encourage the use of alternative fuel vehicles, and for other purposes.
  • S. 2672 sponsored by Sen. John Kerry (D-MA) would provide that oil and gas companies will not be eligible for the effective rate reductions enacted in 2004 for domestic manufacturers. 
  • S. 2677 sponsored by Sen. Gordon Smith (R-OR) would extend the investment tax credit with respect to solar energy property and qualified fuel cell property, and for other purposes.

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