Daily Tax Update - December 07, 2005

HOUSE TO CONSIDER THREE TAX BILLS TODAY:
Later today, the House will take up three tax bills, which, under suspension of normal rules, require the support of two-thirds of the House to pass. The three bills include: (1) individual AMT relief -- "The Stealth Tax Relief Act of 2005" (H.R. 4096); (2) a bill extending several tax provisions that are scheduled to expire at the end of 2005 that were not included in the tax reconciliation bill because of Senate budget rules -- "The Tax Revision Act of 2005" (H.R. 4388); and (3) a bill providing tax incentives for businesses in the hurricane damaged regions -- "The Gulf Opportunity Zone Act of 2005" (H.R. 4440).

  • Tomorrow, the House is expected to consider a fourth bill, "The Tax Relief Extension Reconciliation Act of 2005" (H.R. 4297).
  • The AMT relief bill passed today, by a vote of 414 to 4, would extend the higher Alternative Minimum Tax (AMT) exemption levels by one year (through 2006) and index these amounts to reflect inflation.

TREASURY AND IRS ISSUE PROPOSED REGULATIONS ON CORPORATE ESTIMATED TAX PAYMENTS:
Today, the Treasury Department and IRS issued proposed regulations that provide guidance for corporations to compute their estimated tax liabilities.  According to the Treasury Department, "The proposed regulations replace existing proposed regulations that were issued in 1984.  Those regulations do not provide adequate guidance on how a corporation must determine the amount due with each required installment.  In addition, those regulations do not reflect significant changes to the tax law since 1984, most notably the enactment of the economic performance rules.  As a result, the IRS and Treasury Department have become aware of techniques employed by some firms, particularly those computing their estimated tax payments using an annualization method, that reduce, if not eliminate, estimated tax payments for one or more installments for a taxable year.  The current reproposed regulations provide extensive guidance on how to determine the amount due with each quarterly installment, whether based on the corporation's estimated annual tax liability or the corporation's annualized or adjusted seasonal taxable income, as well as rules for computing estimated tax during a short taxable year. The proposed regulations are proposed to apply to taxable years beginning after the date that is 30 days after the date the final regulations are published in the Federal Register.  The Treasury Department and IRS request comments on the rules contained in the proposed regulations and any additional guidance that should be provided in the final regulations."

The regulations can be accessed here.  

PENSION REFORM WILL NOT BE COMPLETED THIS YEAR:
Yesterday, House Majority Leader Roy Blunt (R-MO) said that the House would not act on a pension reform bill before an interim law expires at the end of December. Blunt said, "Whatever we do on pensions, there really is no likelihood it gets done this year." The Senate passed a pension reform bill last month.

TAX BILLS INTRODUCED DECEMBER 6:

  • H.R. 4440 sponsored by Rep. Jim McCrery (R-LA) would provide tax benefits for the Gulf Opportunity Zone and certain areas affected by Hurricanes Rita and Wilma.
  • H.R. 4441 sponsored by Rep. Robert Andrews (D-NJ) would allow a credit against tax for certain expenses related to the use of recycled materials in qualified highway or surface freight transfer facilities.
  • H.R. 4443 sponsored by Rep. Steve Israel (D-NY) would extend the deduction for qualified tuition and related expenses.
  • H.R. 4449 sponsored by Rep. Frank Pallone, Jr. (D-NJ) would impose a temporary windfall profit tax on crude oil, allow a credit against tax for qualified fuel-efficient vehicles placed in service during the taxable year, and establish the Energy Assistance Trust Fund.
  • H.R. 4451 sponsored by Rep. Edolphus Towns (D-NY) would make residents of Puerto Rico eligible for the refundable portion of the child tax credit.

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.