Daily Tax Update - December 8, 2006

THE DAILY TAX UPDATE WILL BE PUBLISHED ON A PERIODIC BASIS UNTIL THE 110TH CONGRESS CONVENES ON JANUARY 4TH.

IRS HEADQUARTERS REOPENS TODAY—PROCEDURES FOR CERTAIN SUBMISSIONS ANNOUNCED:
The IRS Headquarters Building reopened today as some of its employees returned to the facility following extensive flooding in June.  The phased move-in of more than 2,000 IRS employees will continue in coming weeks following repairs to key parts of the infrastructure at the building, located at 1111 Constitution Ave. NW. 

  • IRS Commissioner Mark Everson said, “The reopening of the Headquarters wraps up an unprecedented period for the IRS Headquarters personnel.  I appreciate the efforts of all our employees during this period.  In addition, I want to thank the IRS workers, contractors and GSA who repaired the building and ensured its’ safety for employees.  I particularly want to thank GSA for keeping this project on track and meeting the key deadlines so the Headquarters could reopen before the beginning of the January tax season.”
  • The IRS also announced that the temporary procedures for submitting certain requests and submissions will no longer be in effect.  As of December 11, taxpayers should make their submissions as they normally did before the IRS building at 1111 Constitution Avenue temporarily closed due to a flood.  Beginning on December 11, taxpayers should follow the normal instructions contained in Revenue Procedures 2005-68 and 2006-1 for expedited letter ruling requests for reorganizations and section 355 distributions.  See Revenue Procedures 2005-68 and 2006-1.Taxpayers are reminded to fax an extra copy of their requests to (202) 622-7707, as indicated in section 7.02(4) of Rev. Proc. 2006-1.  The temporary procedure and the temporary fax and telephone numbers provided in IR-2006-123 should not be used.  During a short transition period, taxpayers should be aware not to fax any expedited requests from December 7th through December 11th.  Telephone and fax communications will only be interrupted during this transition period.
  • Additional information can be accessed here.

HOUSE EXPECTED TO APPROVE TAX, HEALTH, TRADE PACKAGE LATER TODAY: Later today, the House is expected to approve a package of expiring tax provisions, health provisions and trade measures estimated to cost $45 billion over ten years. The package contains several expiring tax provisions, Medicare-related provisions, and offshore drilling legislation.

  • The outlook in the Senate is less certain with several Senators voicing objections both over the cost of the bill and several extraneous provisions including a provision expanding apparel trade benefits to Haiti. Senate Budget Committee Chairman Judd Gregg (R-NH) said that the bill was "500 pages long and $40 billion over budget." Congress is expected to adjourn for the year later this weekend.

The bill would make retroactive to the beginning of 2006 and extend through 2007:

  • an expanded and modified version of the research credit ($16.5 billion over 10 years);
  • the deduction for state and local sales taxes ($5.5 billion);
  • the above-the-line deduction for qualified higher education expenses ($3.3 billion);
  • the above-the-line deduction for teachers' classroom expenses ($379 million);
  • state and local governments' authority to issue qualified zone academy bonds ($330 million);
  • expensing for brownfields remediation costs ($349 million);
  • tax incentives for investment in the District of Columbia ($392 million);
  • tax incentives for Indian employment and business property depreciation on Indian reservations ($405 million);
  • the 15-year straight-line cost recovery for qualified leasehold and restaurant improvements ($5.2 billion);
  • the taxable income limit on percentage depletion for oil and natural gas produced from marginal properties ($176 million);
  • the availability of Archer medical savings accounts (negligible cost); and
  • additional provisions related to distilled spirits, corporate donations of scientific property, and American Samoa ($489 million total).

Additional information can be accessed here.

SOLOMON NOMINATION APPROVED BY FINANCE COMMITTEE:
Yesterday, the Senate Finance Committee favorably reported the nomination of Eric Solomon to be Assistant Secretary of the Treasury. The full Senate will likely approve Solomon's nomination before adjourning for the year.

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.