Daily Tax Update - April 21, 2005

SEC CHAIRMAN REJECTS CALLS TO WEAKEN SARBANES-OXLEY AS "UNJUSTIFIED":
Today, in testimony before the House Financial Services Committee, the Chairman of the SEC, William Donaldson testified on the "Sarbanes-Oxley Act of 2002." Donaldson said, "Although most of the Act’s benefits have been accomplished without substantial expense for market participants, we should not minimize the cost to public companies and their investors of achieving the full measure of the Act’s objectives. In particular, the internal control reporting and auditing requirements, which companies are dealing with for the first time, have required significant outlays of time and expense. We expect that the short-term costs to improve internal control over financial reporting will over the long-term result in structurally sounder corporate practices and more reliable financial reporting. With these critical goals now firmly in view, calls to roll back or weaken Sarbanes-Oxley generally as a result of concern over the costs of internal control reporting are, in my judgment, unjustified."

  • However, Donaldson added, "At the same time, the Commission and the PCAOB [Public Company Accounting Oversight Board] must be sensitive to the need to recalibrate and adjust our rules and guidance to avoid unnecessary costs or unintended consequences. To this end, the Commission and the PCAOB will remain committed to the implementation of the Act in the most efficient and effective way."
  • Donaldson’s testimony can be accessed here.     
  • The Chairman of the Public Company Accounting Oversight Board, William McDonough also testified today. McDonough said, "This year, we expect to develop several standards designed to improve audit quality. First, we will soon consider adopting rules on auditor independence and tax services, based on a proposal we issued for public comment in December 2004. That proposal garnered support from a variety of corners, including investors, auditors, and issuers. The public comments have helped us see certain specific areas in which the proposal could be improved and we are working now to fashion those improvements."
  • McDonough’s testimony can be accessed here

TREASURY SECRETARY TESTIFIES ON TREASURY/IRS BUDGET:
Today, Treasury Secretary John Snow testified before a House appropriations subcommittee on the President's fiscal year 2006 budget for the Department of the Treasury. Snow said, "Treasury's strategic goal to manage the U.S. Government's finances effectively is the largest part of the President's fiscal year 2006 request for the Department. The budget request of $11 billion -- the majority of which is for the Internal Revenue Service -- underscores our commitment to provide quality service to taxpayers and enforce America’s tax laws in a balanced manner.   The request includes a 7.8 percent increase in enforcement funding over fiscal year 2005. The increase will provide additional resources to examine more tax returns, collect past due taxes and investigate cases of tax evasion." Snow continued, "The proposed fiscal year 2006 budget makes a strong commitment to a sound system of tax administration.  The IRS collects $2 trillion annually; however, billions continue to go uncollected every year.  The increase in enforcement funding will be used to bolster audit coverage of corporations and high-income individuals who try to evade taxes as well as to expand collection and criminal investigation efforts. These investments will pay for themselves several times over." Snow added, "The President's request also provides $199 million to continue efforts to modernize the tax system through investments in IRS’ Business Systems Modernization. The modernization program is providing real business benefits to taxpayers and IRS employees by delivering several modernized systems."

TAX BILLS INTRODUCED APRIL 20:

  • H.R. 1723 sponsored by Rep. Jeb Bradley (R-NH) would allow a credit against income tax for recycling or remanufacturing equipment.
  • H.R. 1736 sponsored by Rep. Nancy Johnson (R-CT) would permanently extend the research credit, increase the rates of the alternative incremental credit, and provide an alternative simplified credit for qualified research expenses.
  • H.R. 1742 sponsored by Rep. Charles Rangel (D-NY) would expand the incentives for the construction and renovation of public schools.
  • H.R. 1744 sponsored by Rep. C.A. Ruppersberger (D-MD) would provide incentives for alternative fuels and alternative fuel vehicles.
  • S. 859 sponsored by Sen. Rick Santorum (R-PA) would allow an income tax credit for the provision of homeownership and community development.
  • S. 861 sponsored by Sen. Johnny Isakson (R-GA) would provide transition funding rules for certain plans electing to cease future benefit accruals.

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