Daily Tax Update - February 2, 2007

IRS ISSUES GUIDANCE FOR INDIVIDUALS, MATERIAL ADVISERS SEEKING DISCLOSURE PENALTY RELIEF: Today, the IRS issued Revenue Procedure 2007-21, which provides guidance to persons against whom a penalty under section 6707 or 6707A of the Internal Revenue Code is assessed and who may request rescission of all or any portion of that penalty from the Commissioner of the IRS if the penalty is with respect to a reportable transaction other than a listed transaction.

  • Section 6707A was added to the Code by the American Jobs Creation Act of 2004 and provides a monetary penalty for the failure to disclose information regarding a reportable transaction as required under section 6011. The provision recognizes the IRS’s authority to rescind penalties for taxpayers who are required to disclose those transactions.
  • Today’s revenue procedure, which is effective for rescission requests for which notice and demand or payment is made after October 22, 2004, establishes the procedures for requesting, and the standards for applying, rescission. The IRS will issue additional guidance on preassessment administrative appeal rights for individuals against whom the IRS proposes to assess a section 6707 or 6707A penalty.
  • For additional information, contact Mark J. Silverman - msilverman@steptoe.com or Matthew D. Lerner - mlerner@steptoe.com
  • The revenue procedure can be accessed via: http://www.irs.gov/pub/irs-drop/rp-07-21.pdf

SENATE MINIMUM WAGE / TAX PACKAGE CONTAINS NUMEROUS REVENUE OFFSETS: Yesterday, the Senate passed a minimum wage/small business tax incentives bill that contains several revenue-raising provisions.

Revenue raisers in the bill to offset the cost of the small business tax incentives include:

  • Sale-In/Lease-Out (SILO) – Foreign properties.
  • Corporate Inversions.
  • Denial of Deduction for Punitive Damages. 
  • Denial of Deduction for Certain Fines, Penalties, and Other Amounts.
  • Imposed Mark to Market on Individuals Who Expatriate.
  • Deferred Compensation. 
  • Increase in Certain Criminal Penalties.
  • Doubling of Certain Penalties, Fines, and Interest on Underpayments Related to Certain Offshore Financial Arrangements. 
  • Increase in Penalty for Bad Checks and Money Orders.  
  • Modification of the Tax Treatment of Contingent Payment Convertible Debt Instruments.
  • Extension of IRS User Fees.
  • Amendment of Collection Due Process Procedures for Employment Tax Liabilities.
  • Whistleblower Reforms.
  • Modify Definition of Covered Employee for Corporate Deductions of Employee Remuneration.

Additional information can be accessed via:  http://finance.senate.gov/press/Bpress/2007press/prb011807legb.pdf

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.

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