Daily Tax Update - March 16, 2006

WAYS AND MEANS ANNOUNCES SERIES OF HEARINGS ON TAX REFORM:
On May 23, the House Ways and Means Subcommittee on Select Revenue Measures will hold a hearing on the impact of international tax reform on U.S. competitiveness.  This hearing will be part of a series of hearings on tax reform. According to the Committee, "In its November 2005 report, the President’s Advisory Panel on Federal Tax Reform (the Panel) criticized the current U.S. international tax system as one that ‘distorts business decisions, treats different multinationals differently, and encourages wasteful tax planning.’  As a result, the Panel’s report contained a number of international tax reform proposals that are intended 'to reduce economic distortions and improve the fairness of the U.S. international tax regime by creating a more level playing field that supports U.S. competitiveness.'  Lawmakers, taxpayers, practitioners and academics have similarly criticized the U.S. international tax system and have also proposed reforms."

  • In announcing the hearing, Subcommittee Chairman Dave Camp (R-MI) stated, "This hearing will provide us the opportunity to understand how the current U.S. international tax system impacts the competitiveness of U.S. multinational corporations and to evaluate how this system can be reformed to enhance our competitiveness abroad and stimulate job creation at home."

TAX RECONCILIATION CONFERENCE GETS UNDERWAY:
Yesterday, Senate Finance Committee Charles Grassley (R-IA) was selected chairman of the tax reconciliation conference committee. Grassley said that his goal for the conference was to produce a true bipartisan, bicameral compromise that merges both [the House and Senate] bills." Grassley said that a "true compromise" should include the AMT relief in the Senate bill, dividends and capital gains relief in the House bill, the extenders and Senate revenue-raisers. The conferees still need to resolve a possible budget point of order on provisions extending favorable rates on dividend and capital gains income.

  • Ranking Finance Committee Max Baucus (D-MT) issued a statement yesterday. Baucus said, "Clearly, we cannot stuff all these tax provisions into a $70 billion bill, even if we diet, and even if we use fancy math. My concern all along has been that we will not be taking care of first things first.  AMT must be a priority." Baucus added, "If these traditional extensions are left outside this bill, they face an uncertain future in an amendable tax bill during an election year.  I am hopeful, Mr. Chairman, that we can take care of these first things first." 
  • On the issue of revenue raisers, House Ways and Means Committee Chairman Bill Thomas (R-CA) said, "What someone might call an appropriate revenue raiser, I might call that policy for the sake of finding money. And I don't think we should ever look at policy for the sake of finding money if in fact what we put in place to find that money is not meritorious in itself."

TAX BILL INTRODUCED MARCH 15:

  • H.R. 4960 sponsored by Rep. Eric Cantor (R-VA) would allow 5-year amortization of goodwill and other section 197 intangibles that are acquired from a small business.
  • H.R. 4961 sponsored by Rep. Melissa Hart (R-PA) would provide that the deduction for the health insurance costs of self-employed individuals be allowed in determining self-employment tax.
  • S. 2424 sponsored by Sen. George Allen (R-VA) would increase the contribution limits for health savings accounts.

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