Daily Tax Update - July 11, 2007

FINANCE COMMITTEE HEARS TESTIMONY ON CARRIED INTEREST:  Today, the Senate Finance Committee heard testimony from administration and private sector witnesses on the tax treatment of carried interest.  Committee Chairman Sen. Max Baucus (D-MT) said that the committee is seeking only to “ensure there is fair tax treatment of carried interest, the share of capital gains given to an investment manager as compensation for a profitable fund.”  Baucus said, “The purpose of these hearings is to explore the economics and understand the arguments. . . . No matter what we may ultimately decide to do, we will in no way wish to change the interests of the limited partners.”

  • Ranking member Sen. Charles Grassley (R-IA) said, “Some have inaccurately described this bill as an attack on capital formation and as a tax increase on a single industry.  But this issue is about closing a loophole, not raising taxes.”
  • Treasury Assistant Secretary for Tax Policy Eric Solomon discussed the current taxation of carried interests, the use of carried interests by both small and large partnerships in industries as diverse as real estate and natural resources, and the similarity of the current tax treatment for carried interests and other analogous areas.  Solomon said, “The current tax treatment of carried interests provides certainty for taxpayers in planning their transactions and, at the same time, is administrable for the IRS.  The current taxation of carried interests also encourages the pooling of capital, ideas and skills in a manner that promotes entrepreneurship and risk-taking.  Partnerships of every size and every industry have established and operated their businesses in reliance on the existing tax rules.  While it is important to review our tax laws and policies, we must be cautious about making significant changes to partnership tax rules that have worked successfully to promote and support entrepreneurship for many decades.”
  • Testimony can be accessed via: http://finance.senate.gov/sitepages/hearing071207.htm

HOUSE CONSIDERATION OF AMT LIKELY POSTPONED UNTIL FALL:  Today, House Majority Leader Steny Hoyer (D-MD) said that House consideration of an AMT proposal would likely be delayed until the fall due to “substantial” floor time on the remaining fiscal year 2008 appropriations bills.  Although the House had hoped to take up an AMT reform bill in July, Hoyer said that timeline has likely changed until after the August recess.  Hoyer said, “I don't want to promise it before the August break. . . . We haven't moved as quickly as we hoped on [AMT] because we haven't reached consensus as quickly as we hoped on that.”  Democrats are still considering various options to pay for an AMT reform bill. 

TAX BILLS INTRODUCED JULY 10TH:
H.R. 2966: To amend the Internal Revenue Code of 1986 to provide a credit for the conversion of hybrid motor vehicles to plug-in hybrid motor vehicles.
Sponsor: Rep. Markey, Edward J. [MA-7] (introduced 7/10/2007)      Cosponsors (3)

H.R. 2983: To amend the Internal Revenue Code of 1986 to provide middle class tax relief, impose a surtax for families with incomes over $1,000,000, and for other purposes.
Sponsor: Rep. Weiner, Anthony D. [NY-9] (introduced 7/10/2007)      Cosponsors (None)

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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