Daily Tax Update - June 09, 2005

TRANSPORTATION SECRETARY VOICES CRITICISM OF HIGHWAY REAUTHORIZATION BILL OFFSETS:
Today, the House and Senate highway reauthorization bill conferees held their first official meeting to begin reconciling the differences between the $284 billion House bill and the $295 billion Senate version.

  • Earlier this week, Transportation Secretary Norman Mineta sent a letter to the conferees criticizing the offsets in the Senate bill. Mineta said that the offsets merely shift revenue from the general treasury to the federal highway trust fund rather than producing new revenue. Mineta also reiterated the Administration’s pledge to veto any legislation costing more than $284 billion.
  • Mineta’s letter said that the Senate bill "purports to offset the additional spending with $7.9 billion of new income to the Highway Trust Fund. Yet, the [revenue offset] provisions do not include new revenues to the Federal Government that would offset this new funding; they merely shift revenues within the Federal budget."
  • Mineta’s letter continued, "The bulk of the new revenues assumed in the Senate bill do not come [from various transportation and fuel taxes], but rather from language imposing a new legal standard for determining whether financial transactions that would normally reduce taxable income should be disallowed (the "economic substance" doctrine). This revenue offset has appeared in over a dozen Senate bills in recent years but has never been enacted -- and for good reason. It would produce a standard that would be difficult for taxpayers, the Internal Revenue Service, and the courts to administer, would not provide more certainty in the law, and could apply inappropriately to legitimate business transactions."
  • Mineta’s letter can be accessed here.

COMPREHENSIVE PENSION REFORM LEGISLATION INTRODUCED:
Today, comprehensive pension reform legislation was introduced by Education and Workforce Committee Chairman John Boehner, Ways and Means Committee Chairman Bill Thomas, and Employer-Employee Relations Subcommittee Chairman Sam Johnson. The bill is a scaled back version of the Bush administration’s pension proposals made earlier this year.

  • All or parts of the bill may be wrapped into a larger retirement-security package. Ways and Means Chairman Thomas said, "By putting them together I think it speeds the process." Thomas also noted that personal savings provisions would also be part of the package.
  • Treasury Secretary John W. Snow issued a statement saying the bill "is a significant step forward towards strengthening and securing pensions for American workers. I am pleased that [the bill] employs the essential structure of the Administration’s proposal."

TAX BILLS INTRODUCED JUNE 8:

  • H.R. 2794 sponsored by Rep. Ron Lewis (R-KY) would allow a credit to holders of qualified bonds issued to finance certain energy projects. H.R. 2801 sponsored by Rep. Jim Davis (D-FL) would allow employers a credit against income tax for the costs of providing technical training for employees.
  • H.R. 2812 sponsored by Rep. Carolyn Maloney (D-NY) would require that group and individual health insurance coverage and group health plans cover breast, prostate, and colorectal cancer.
  • H.R. 2815 sponsored by Rep. Robert Menendez (D-NJ) would expand and enhance the HOPE and Lifetime Learning Credits, and amend the Higher Education Act of 1965 to provide loan forgiveness opportunities for public service employees.
  • H.R. 2822 sponsored by Rep. Ron Paul (R-TX) would provide a tax credit for police officers and professional firefighters, and exclude from income certain benefits received by public safety volunteers.
  • H.R. 2823 sponsored by Rep. Ron Paul (R-TX) would provide for a nonrefundable tax credit for law enforcement officers who purchase armor vests.
  • S. 1200 sponsored by Sen. Jim Bunning (R-KY) would reduce the depreciation recovery period for certain roof systems.
  • S. 1203 sponsored by Sen. Chuck Hagel (R-NE) would provide tax incentives for the investment in greenhouse gas intensity reduction projects.

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
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