Daily Tax Update - December 12, 2007

HOUSE EXPECTED TO VOTE TODAY ON NEW REVENUE-NEUTRAL AMT BILL:  House Ways and Means Committee Chairman Charles Rangel (D-NY) introduced a new $55.72 billion AMT patch bill yesterday which would be paid for, in part, by making some changes to the deferred compensation of hedge fund managers and by clarifying the economic substance doctrine. H.R. 4351 would extend for one year AMT relief for nonrefundable personal credits and increase the AMT exemption amount to $66,250 for joint filers and $44,350 for single filers to ensure that no additional taxpayers are liable for the AMT this year. The legislation would also increase the eligibility for the refundable child tax credit in 2008 by lowering the income floor for qualification to $8,500. The bill does not contain the extenders.

  • The House is expected to take up the bill later today. However, the bill is expected to face considerable opposition in the Senate, where Democratic leaders have said they cannot get 60 votes for a bill that complies with pay-as-you-go budget rules. Today, House Majority Leader Steny Hoyer (D-MD) was asked if the House would ultimately approve an AMT patch without offsets. Hoyer responded, “We are going to have to cross that bridge when we get to it. I will work very hard to get AMT paid for. [Senate Majority Leader] Harry Reid doesn't have 60 votes."
  • Today, the Administration threatened to veto the new House bill and blamed House Democrats for the delay in enacting AMT relief. The Administration’s letter said that the various offsets "would increase tax burdens, undermining the competitiveness of US businesses in the global economy, and could have adverse effects on the US economy.” The statement of Administration policy added, “The House of Representatives' stubbornness on this point has already imposed enormous administrative challenges for the Internal Revenue Service (IRS) and all but assured a late filing season and delays for tens of billions of dollars in refund checks.”
  • Rangel’s bill would:
    • Ensure that no additional taxpayers pay the AMT this year
    • Expand the refundable child tax credit to provide relief to more than 12 million children
    • Close loophole allowing hedge fund managers to defer compensation in offshore accounts
    • Delay implementation of worldwide allocation of interest
    • Clarify the economic substance doctrine
    • Create uniform penalty for failure to file partnership and S corporation returns
    • Increase information return penalties
    • Increase general failure to file return penalties by taking inflation into account.
    • A summary of the bill can be accessed via: http://waysandmeans.house.gov/media/pdf/110/New%20House%20AMT%20Bill3.pdf

TAX BILLS INTRODUCED DECEMBER 11TH:
H.R.4351: To amend the Internal Revenue Code of 1986 to provide individuals temporary relief from the alternative minimum tax, and for other purposes.
Sponsor: Rep Rangel, Charles B. [NY-15] (introduced 12/11/2007)      Cosponsors (None)

H.R.4368: To amend the Internal Revenue Code of 1986 to provide special disposition rules for unused benefits in flexible spending arrangements of individuals called to active duty.
Sponsor: Rep Barton, Joe [TX-6] (introduced 12/11/2007)      Cosponsors (1)

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
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