Daily Tax Update - April 13, 2005

HOUSE EXPECTED TO PASS PERMANENT ESTATE TAX REPEAL BILL
Later today, the House is expected to approve a bill that would permanently repeal the estate tax. The bill would repeal the sunset provision on the estate and gift tax breaks enacted in the 2001 tax cut law.

  • The bill faces an uncertain fate in the Senate. Senate proponents will try to seek a compromise that could secure the 60 votes needed to overcome an expected filibuster. Sen. Rick Santorum (R-PA) said yesterday that he hopes for a "permanent repeal or some variation of a permanent repeal" of the estate tax. Santorum further said he hopes for a "compromise that receives broad bipartisan support."

TEMPORARY AND PROPOSED REGULATIONS TREAT SIX EUROPEAN ENTITIES AS PER SE CORPORATIONS
Temporary and proposed regulations issued today adopt a position announced by the IRS in Notice 2004-68, which added six European entities to the per se corporation list for entity classification purposes. These entities, all of which are public limited liability companies, are the Estonian Aktsiaselts, Latvian Akciju Sabiedriba, Lithuanian Akcine Bendroves, Slovenian Delniska Druzba, Liechtenstein Aktiengesellschaft, and the Societas Europaea ("SE"), a business entity established by the European Union in 2001. The temporary regulations apply to an SE formed on or after October 8, 2004, and generally apply to the remaining listed entities to the extent they are formed on or after October 7, 2004. The preamble to the temporary regulations states that Treasury and the IRS are inviting public comments regarding the proper status of a SE when applying certain code provisions, such as the same-country exception under section 954(c)(3).

TAX BILLS INTRODUCED APRIL 12:

  • H.R. 1541 sponsored by Rep. William Thomas (R-CA) would enhance energy infrastructure properties in the United States and encourage the use of certain energy technologies.
  • H.R. 1545 sponsored by Rep. Chris Cannon (R-UT) would treat expenses for certain meal replacement and dietary supplement products that qualify for FDA-approved health claims as expenses for medical care.
  • H.R. 1548 sponsored by Rep. Paul Ryan (R-WI) would provide for collegiate housing and infrastructure grants.
  • H.R. 1549 sponsored by Rep. Thomas Reynolds (R-NY) would allow an income tax credit for the provision of homeownership and community development.
  • H.R. 1555 sponsored by Rep. Madeleine Bordallo (D-GU) would provide for the cover over of the refundable portion of the earned income and child tax credits to Guam and the Virgin Islands.
  • H.R. 1557 sponsored by Rep. Barbara Cubin (R-WY) would provide an election for a special tax treatment of certain S corporation conversions.
  • H.R. 1560 sponsored by Rep. Harold Ford, Jr. (D-TN) would increase the exclusion equivalent of the unified credit allowed against the estate tax to $7,500,000 and establish a flat estate tax rate.
  • H.R. 1561 sponsored by Rep. Harold Ford, Jr. (D-TN) would expand the incentives for adoption and amend part E of title IV of the Social Security Act to increase adoptive incentive payments.
  • H.R. 1568 sponsored by Rep. James Leach (R-IA) would permanently reduce estate and gift tax rates to 30 percent, increase the exclusion equivalent of the unified credit to $10,000,000, and increase the annual gift tax exclusion to $50,000.
  • H.R. 1574 sponsored by Rep. Dennis Moore (D-KS) would restore the estate tax and repeal the carryover basis rule and increase the estate tax unified credit to an exclusion equivalent of $3,500,000.
  • H.R. 1577 sponsored by Rep. Earl Pomeroy (D-ND) would retain the estate tax with an immediate increase in the exemption, repeal the new carryover basis rules in order to prevent tax increases and the imposition of compliance burdens on many more estates than would benefit from repeal.
  • H.R. 1583 sponsored by Rep. Chris Van Hollen (D-MD) would repeal provisions relating to qualified tax collection contracts.

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