Daily Tax Update - June 20, 2007

IRS ISSUES PROPOSED AND TEMPORARY REGULATIONS RELATING TO THE SUSPENSION OF INTEREST UNDER SECTION 6404(g):  Today, the Treasury Department and IRS announced the issuance of temporary and proposed regulations relating to the suspension of interest under Section 6404(g).  Under Section 6404(g), if a taxpayer files a federal income tax return on or before the due date of that return (including extensions), and if the IRS does not timely provide notice to that taxpayer stating the amount and basis of that taxpayer’s liability, then the IRS must suspend any interest, penalty, additions to tax, and additional amounts.  “Notice” is considered timely if it is issued within an 18 month period (or 36 months for notices after November 25, 2007) beginning on the later of the date the return is filed or the due date of the return, including extensions.  The 2004 JOBS Act excepted from the general suspension rule interest, penalties, additions to tax, and additional amounts with respect to a listed or an undisclosed reportable transaction accruing after October 3, 2004. 

  • The temporary regulations (issued also in proposed form) provide special rules with respect to interest relating to listed or undisclosed reportable transactions accruing on or before October 3, 2004.  Under this special rule, suspension is only available to (1) a participant in a settlement initiative; (2) a taxpayer acting reasonably and in good faith, or (3) a closed transaction.  Each of these categories are defined in greater detail in the temporary regulations. 
  • In addition, the Treasury and IRS issued proposed regulations providing guidance on the application of Section 6404(g), including:
    • How it effects amended returns that show increases and decreases in tax liability; 
    • The method, manner, and content of the notice the IRS  must provide to taxpayers; and
    • Refining the exception to Section 6404(g) interest suspension in cases of taxpayer fraud.
  • For additional information, contact Mark J. Silverman or Matthew D. Lerner.
  • The regulations can be accessed via:  http://www.steptoe.com/assets/attachments/3037.pdf

H.R. 2776: To amend the Internal Revenue Code of 1986 to provide tax incentives for the production of renewable energy and energy conservation. Sponsor: Rep. Rangel, Charles B. [NY-15] (introduced 6/19/2007) Cosponsors (21)

H.R. 2782 : To amend the Internal Revenue Code of 1986 to extend the deduction for qualified tuition and related expenses. Sponsor: Rep. Rehberg, Dennis R. [MT] (introduced 6/19/2007) Cosponsors (None)

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