Daily Tax Update - August 10, 2007

THE DAILY TAX UPDATE WILL BE PUBLISHED ON A PERIODIC BASIS UNTIL CONGRESS RETURNS ON SEPTEMBER 4TH

PRESIDENT CONSIDERING CORPORATE RATE CUT:  At a press conference yesterday, President Bush suggested that he is considering cutting the corporate tax rate.  The President said, “We're at the very early stages of discussion, and that in my own judgment, anything that would be submitted to Congress -- if submitted at all -- would have to be revenue-neutral.”  The President continued, “And therefore, what we'd really be talking about is a simplification of a very complex tax code that might be able to lower rates and at the same time simplify the code, which is like shorthand for certain deductions would be taken away -- in other words, certain tax preferences in the code.  My view all along has been the more simple the code, the better -- whether it be in the individual income tax side or the corporate tax side.”  The President added, “However, I would readily concede to you this is a difficult issue because the reason there is tax preferences in the first place are there are powerful interests that have worked to get the preference in the code. . . . But I do think it's in the interests to constantly evaluate our competitive advantages and disadvantages.  And what Hank Paulson told me was that there's a lot of folks who really believe the tax code creates a competitive disadvantage and therefore it's certainly worth looking at.”

  • Last month, the Treasury Department released a report that outlined alternatives for tax reform, including eliminating special tax breaks including the Section 199 manufacturing deduction, the research and development tax credit, Subpart F deferral, and the low-income housing tax credit.

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

STEPTOE’S UK AUGUST 2007 TAX LAW UPDATE CAN BE ACCESSED VIA:
http://www.steptoe.com/assets/attachments/3109.pdf

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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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