Daily Tax Update - March 23, 2007

HOUSE NARROWLY APPROVES SMALL BUSINESS TAX BREAKS:  Today the House passed, by a vote of 218-212, an emergency war supplemental spending bill (H.R. 1591), which included $1.3 billion in tax breaks for small businesses.  The $124 billion package for fiscal year 2007 also includes a $2.10 minimum wage increase and $22 billion in nonwar, domestic spending.

  • The Senate Appropriations Committee approved its own supplemental spending bill yesterday, but that package did not include similar wage and tax provisions.
  • The White House has said President Bush will veto the spending bill if it reaches his desk in its current form.

SENATE EXPECTED TO APPROVE FY08 BUDGET RESOLUTION:  This afternoon, the Senate is expected to approve a $2.9 trillion budget resolution to set federal spending priorities for FY08, after a marathon vote on more than 65 amendments.

  • Minority Whip Trent Lott (R-MS) called the budget "the pathway to the largest tax increase we have ever seen," and Sen. Jon Kyl (R-AZ) said the budget resolution reflected the attitude that "money grows on trees."  Budget Chairman Kent Conrad (D-ND) denied that his plan would raise taxes, and touted it as a long-overdue fiscal reform package. Conrad said the budget would retain key features of the 2001 and 2003 tax cuts, such as the $1,000 child-care credit and abolition of the marriage penalty, while preventing an additional 23 million income earners from having to pay the alternative minimum tax.  To boost government revenues, the plan would recoup an estimated $345 million a year in taxes "owed but not paid" by cracking down on corporations that shift financial assets to offshore accounts in tax havens such as the Cayman Islands.

RANGEL ANNOUNCES INVESTIGATION INTO PRIVATE DEBT COLLECTION:  In a letter to Internal Revenue Service Commissioner Mark Everson, House Ways and Means Committee Chairman Charles Rangel (D-NY) announced that his committee is conducting an investigation into the use of private companies to collect delinquent tax debt, and he asked the IRS not to award any new private tax collection contracts in 2007.

  • Rangel said he plans to enact legislation this year to repeal or significantly modify the authority granted to the IRS to hire outside collectors under Internal Revenue Code Section 6306.  "We have heard too many complaints and concerns about the tactics used by private debt collectors to allow the IRS to issue new contracts," Rangel said in his letter to Everson. 

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
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