Daily Tax Update - January 10, 2007

TREASURY, IRS ISSUE GUIDANCE ON NEW DISTRIBUTION PROVISIONS OF THE PENSION PROTECTION ACT: Today, the Treasury Department and the IRS issued Notice 2007-7 providing extensive guidance on several Pension Protection Act (PPA) rules relating to distributions from tax-qualified retirement plans. Most of the provisions addressed are applicable now or in the very near future.

The guidance addresses many questions on PPA provisions, including:

  • interest rate assumptions for lump sum distributions from defined benefit plans, and methods of correcting certain distributions made in 2006
  • hardship distributions from a 401(k) and similar plans 
  • early distributions from qualified plans to terminated public safety employees 
  • rollovers from qualified plans to IRAs for non-spouse beneficiaries 
  • distributions to pay for health insurance for retired public safety officers 
  • earlier vesting of certain employer contributions 
  • new rules for the notice and consent period for distributions.

The notice also clarifies several issues concerning the provision permitting IRA owners age 70 ½ or older to directly transfer tax-free, up to $100,000 per year to an eligible charity. For example, a check from an IRA made payable

IRS, HOLLYWOOD FOREIGN PRESS ASSOCIATION REACH AGREEMENT ON GIFT BASKETS: Today, the IRS announced that it has reached an agreement with the Hollywood Foreign Press Association (HFPA) that will resolve outstanding tax responsibilities with respect to Golden Globe Awards presenter gift baskets. Under the closing agreement, the HFPA and the IRS have settled the tax obligations with respect to gifts given through 2005. Recipients of 2006 gift boxes will be issued appropriate informational tax forms by the HFPA and will be responsible for satisfying their income tax obligations.

  • Commissioner Mark Everson said, "The fact this gift bag practice grew so quickly is stranger than fiction. We’re happy the Hollywood Foreign Press Association stepped forward to resolve this issue."

TAX BILLS INTRODUCED JANUARY 9TH CAN BE ACCESSED VIA:
http://www.steptoe.com/assets/attachments/2781.pdf

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.