Daily Tax Update - January 7, 2005

President Names Tax Reform Panel Members
Today, President Bush announced the appointees to his tax reform commission. The President’s Advisory Panel on Federal Tax Reform will advise the Secretary of the Treasury on options to reform the tax code to make it simpler, fairer, and more pro-growth.   Former Senator Connie Mack (R-FL) will chair the commission, while former Senator John Breaux (D-LA) will serve as co-chair. The panel is expected to report its recommendations to Treasury Secretary Snow by July 31.

  • In announcing the commission, President Bush said, "I believe this is an essential task for our country. It's a task that will treat our taxpayers more fairly. A simple code will make it easier on the taxpayers. But it's an important task in order to make sure the economic growth we are seeing in the United States continues forward." The President added, "These fine distinguished citizens will be taking a good, hard look at the tax code and coming up with recommendations as to how to make sure the tax code encourages economic vitality and growth. It seems like to me the tax code today discourages economic vitality and growth when you spend billions of hours filling out the forms. And so I want to thank you all for taking on this important job."
  • Other commission members include former IRS Commissioner Charles Rossotti; James Poterba, department of economics at the Massachusetts Institute of Technology; former Representative Bill Frenzel (R-MN); Elizabeth Garrett, a law professor at the University of Southern California; Edward Lazear, professor of human resources, management, and economics at Stanford University's graduate school of business; Timothy Muris, with O'Melveny & Myers LLP; and Liz Ann Sonders, chief investment strategist with Charles Schwab.
  • Treasury Secretary John Snow said, "The President's bipartisan panel on tax reform, announced today, brings together some of our nation's brightest minds.  Reforming our tax code to give Americans a tax system that fosters economic growth and is fairer and simpler will be a historic effort.  I look forward to working with this group of extraordinarily distinguished individuals to make recommendations to help achieve this important goal."

IRS Liberalizes Interest Suspension Rule For Amended Returns
Today, the IRS announced a liberalization of the rule for interest owed on additional taxes voluntarily reported by taxpayers. Section 6404(g) suspends interest accrual for individuals on taxes due if the IRS does not notify a taxpayer of the potential liability within 18 months after the filing of the return. This interest suspension then continues until 21 days after the IRS notifies the taxpayer of additional taxes due.

  • According to the IRS, "Previously, this rule was applied only where the additional taxes were found by the IRS. Revenue Ruling 2005-4 extends the scope of section 6404(g) to additional taxes voluntarily reported by taxpayers on amended returns or in correspondence to the IRS. Further, to allow taxpayers to benefit from these expanded rules for earlier years, the ruling applies to amended returns or correspondence submitted for tax years ending after July 22, 1998, the date section 6404(g) was enacted."
  • IRS Commissioner Mark Everson said, "This puts taxpayers who come forward voluntarily on the same footing as those we have pursued, which is only fair. But it's important to note the suspension rules are different for people who have entered into designated abusive transactions."
  • The "American Jobs Creation Act of 2004" eliminated any interest suspension for transactions that have been designated as potentially abusive. The provision became effective October 3, 2004.
  • The revenue ruling can be accessed here

Tax Bills Introduced January 6:

  • H.R. 241 sponsored by Rep. William Thomas (R-CA) would accelerate the income tax benefits for charitable cash contributions for the relief of victims of the Indian Ocean tsunami.
  • H.R. 263 sponsored by Rep. Michael Bilirakis (R-FL) would allow employers a tax credit for hiring displaced homemakers.
  • H.R. 264 sponsored by Rep. Jeb Bradley (R-NH) would allow a lump sum contribution to Coverdell education savings accounts whenever the contribution limit is increased.
  • H.R. 265 sponsored by Rep. Jeb Bradley (R-NH) would provide an exclusion from gross income for student loan payments made by an employer on behalf of an employee.
  • H.R. 268 sponsored by Rep. Dave Camp (R-MI) would repeal the sunset of the Economic Growth and Tax Relief Reconciliation Act of 2001 with respect to the expansion of the adoption credit and adoption assistance programs.
  • H.R. 273 sponsored by Rep. Donna Christensen (D-VI) would repeal the cap on the cover over of tax on distilled spirits to Puerto Rico and the Virgin Islands.

Additional Information

Steptoe & Johnson LLP’s recent tax alerts, speeches, and articles
Previous editions of the Daily Tax Update
Treasury Department news releases and fact sheets
IRS news releases and fact sheets

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