Daily Tax Update - August 30, 2007

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

TRADE PRESS CITES STEPTOE ATTORNEYS' VICTORY IN TEXTRON CASE:  Steptoe & Johnson's tax partners, Art Bailey and Walker Johnson, were quoted in several trade press articles regarding their involvement in yesterday's Textron's tax accrual workpapers opinion issued by the United States District Court for the District of Rhode Island.  Today's Wall Street Journal states that, "Textron was represented by two prominent tax-controversy lawyers, Arthur Bailey and J. Walker Johnson of Steptoe & Johnson LLP."  An article in today's Daily Tax Report quotes the attorneys:  "I think it's an important case," Johnson said.  "It's more than a tax case."  Bailey agreed, saying in his view, "it's as much a case involving civil procedure and discovery" as it is a tax dispute.

IRS ANNOUNCES CLOSING AGREEMENT PROGRAM FOR FORWARD-FLOAT AGREEMENTS USED WITH MUNICIPAL BONDS:  Today, the IRS announced a new Voluntary Closing Agreement Program (VCAP) to address violations of federal tax law on arbitrage investment restrictions.  The violations are related to non-fair market value purchases of forward-float investment agreements used in advance refundings of tax-exempt municipal bonds.

  • According to the IRS, “This program will be available to municipal bond issuers who wish to correct such violations.  A link to a document describing the VCAP, along with a comprehensive example can be found on www.irs.gov/bonds.  The purchase of a forward-float agreement at a yield below fair market value could result in a violation of applicable arbitrage yield restrictions, for which there is generally no “self-correction” vehicle available.”  The IRS added, “Resolution terms described in this program are only available until March 1, 2008.  Failure to correct a violation could result in a related bond issue being deemed “arbitrage bonds,” which lose their tax-exempt status.”
  • Clifford Gannett, director of the Tax-Exempt Bonds division of the IRS, said, “We anticipate that this will be the first of several special compliance programs developed to assist issuers in voluntarily resolving specific violations.”

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.

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.