Daily Tax Update - July 26, 2007

GRASSLEY EXPRESSES DOUBT THAT CARRIED INTEREST LEGISLATION WILL MOVE THIS YEAR: Ranking Senate Finance Committee member Charles Grassley (R-IA) said yesterday that he doubts there will be any Congressional action on any proposal to increase taxes on carried interests.  Grassley said, “There are powerful forces in this town that have been organized specifically on this issue that are probably going to be able to slow it up into next year.”  Grassley said he has not yet decided whether to support any effort to tax carried interests as compensation for services at ordinary income rates.  Grassley added, “I have not made up my mind on carried interest yet, because we have one more hearing.”

  • However, Grassley said that the chances for action this year on legislation he sponsored which would tax publicly traded partnerships that make money by providing financial services as corporations, are better than for a carried interest proposal.  Grassley added, “I think that outlook is very good.  I haven't heard the president threaten to veto [it] like I have on carried interest."
  • The Senate Finance Committee will hold a second hearing on carried interest on July 31st.
TRANSFER PRICING DOCUMENTATION DEADLINE ON SEPTEMBER 15, 2007 FOR CALENDAR YEAR TAXPAYERS: To avoid penalties, taxpayers should have appropriate documentation of their transfer pricing methodologies and results by the time they file their tax returns.  For calendar year taxpayers, this means that the documentation must be completed by September 15.  IRS agents have been instructed to look critically at this documentation, so companies may want to reconsider the standards they have used in the past for determining whether their documentation is rigorous and specific enough.  Steptoe's transfer pricing group is available and particularly well-situated to assist with that work.  Click here for more information.

TAX BILL INTRODUCED JULY 25th:
S.1875: A bill to amend the Internal Revenue Code of 1986 to provide a refundable and advanceable credit for health insurance, to amend the Social Security Act to provide for improved private health insurance access and affordability, to amend the Internal Revenue Code of 1986 to repeal the alternative minimum tax, and for other purposes. Sponsor: Sen. DeMint, Jim [SC] (introduced 7/25/2007) 

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
Steptoe & Johnson LLP has one of the largest and most diverse law firm tax practices in the country. The practice covers the entire spectrum of federal taxation, including representation of businesses before the Congress, Treasury and the national office of the IRS; transactional planning for domestic and multinational corporations; complex audit and controversy work for corporations and other business interests contesting IRS adjustments; litigation before the Tax Court, Court of Federal Claims, district courts, courts of appeals and the Supreme Court. The firm's tax practice also encompasses all aspects of employee benefits (ERISA), executive compensation, tax-exempt organizations and charitable giving. Steptoe has an extensive state and local tax practice, representing an array of business clients on complex sales and use tax, corporate income tax and property tax matters, both advising those clients and handling audits, administrative appeals, and litigation for them. Read more information on Steptoe's tax practice.