Daily Tax Update - February 7, 2007

IRS ISSUES GUIDANCE ON SECTION 4965 EXCISE TAX ON PROHIBITED TAX SHELTER TRANSACTIONS: Today, the IRS issued Notice 2007-18, providing guidance relating to the Section 4965 excise tax that is imposed on certain tax-exempt entities and entity managers if they enter into transactions designated as prohibited tax shelter transactions. Section 4965 was enacted in May 2006 as part of the Tax Increase Prevention and Reconciliation Act of 2005 ("TIPRA").  Notice 2007-18 addresses two issues:

Today,the IRS issued Notice 2007-18, providing guidance relating to the Section 4965 excise tax that is imposed on certain tax-exempt entities and entity managers if they enter into transactions designated as prohibited tax shelter transactions. Section 4965 was enacted in May 2006 as part of the Tax Increase Prevention and Reconciliation Act of 2005 ("TIPRA").  Notice 2007-18 addresses two issues:
  1. The meaning of the phrase "tax-exempt party to a prohibited tax shelter transaction" for purposes of IRC § 4965 and related disclosure requirements; and
  2. The appropriate treatment of net income or proceeds received by entities described in IRC §§ 4965(c)(1), (2), and (3) (referred to as " Non-Plan Entities") before the effective date of the tax imposed under IRC § 4965(a).

WAYS AND MEANS COMMITTEE TO MARK-UP SMALL BUSINESS TAX BILL: On February 12th, the House Ways and Means Committee is scheduled to consider a small business tax bill "in the vicinity of $1 billion." Committee Chairman Charles Rangel (D-NY) said that it would include about $1 billion in offsets to make it revenue neutral. The bill is expected to be considered by the House later next week.

TAX BILLS INTRODUCED FEBRUARY 6TH CAN BE ACCESSED VIA:
http://www.steptoe.com/assets/attachments/2845.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.

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