Daily Tax Update - January 26, 2006

STEPTOE TAX PARTNERS DISCUSS FINAL SECTION 355(e) REGULATIONS:
In an article published in the Tax Executives Institute’s November-December 2005 journal, the authors, Mark Silverman and Lisa Zarlenga of Steptoe & Johnson LLP discuss the final section 355(e) plan regulations. The authors note that "[S]ince the enactment of section 355(e), the Treasury Department and the IRS have struggled to reconcile the purposes of the statute with its overbroad language." The article further states that these regulations represent the "final chapter in a saga that has been evolving since the issuance of the initial proposed regulations in 1999. The 2002 temporary regulations had taken a giant leap forward, shifting the focus to whether there were bilateral negotiations between the acquirer and Distributor or Controlled through adoption of the Super Safe Harbor. The 2002 temporary regulations, however, continued to lack guidance in the context of pre-distribution acquisitions and public offerings, which the final regulations have sought to provide. Although the guidance does not go far enough in some cases, it is nonetheless a step in the right direction and provides very useful guidance for taxpayers."

SENATE EXPECTED TO NAME TAX RECONCILIATION BILL CONFEREES NEXT WEEK:
Senate Finance Committee Chairman Charles Grassley (R-IA) said that he expects that the Senate will name its tax reconciliation conferees by February 3. However, the Senate must approve the House-passed tax reconciliation bill and amend it with the Senate language before Senate conferees can be named.

  • Among the most contentious issues that the tax reconciliation conferees have to resolve are the capital gains and dividend provision in the House bill and differing proposals dealing with the alternative minimum tax. Grassley said that he hopes both the capital gains and dividends provision and the AMT fix would be contained in the final conference report. Grassley said that it was his "goal" to pass a two-year extension of the reduced rates on capital gains and dividends, but that Senate opposition may require that the conferees agree on a one-year extension instead. Grassley added, "Everything I do is going to have to be judged by what we can get votes [for] to pass in the Senate." The House returns in session on January 31.

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