Daily Tax Update - January 31, 2008

SENATE VOTE ON STIMULUS BILL LIKELY DELAYED UNTIL NEXT WEEK:  Last night, the Senate Finance Committee passed a $156 billion economic stimulus package. The bill adds tax breaks for alternative energies and homebuilders, and disqualifies upper-income taxpayers from getting rebate checks. The bill provides additional business incentives such as an extension of the net operating loss carry-back period to five years.

  • A vote on the bill could be delayed until at least February 4th until procedural details and amendments are worked out. Today, Senate Majority Leader Harry Reid (D-NV) said, “I think the House package is quite good. But there was always every intention. . .that we would do what we thought would improve the legislation.”
  • Finance Committee Chairman Max Baucus (D-MT) remained “quite confident” that his provision giving rebates to seniors and veterans would be included in the final package. Sen. Charles Schumer (D-NY) added, “We're going to make a push to get those in. If it fails, we'll pass the House bill, but we think we can make that try, we think we have a chance to win, not a certainty, and that's what's going to happen.”
  • Today, Treasury Secretary Henry Paulson said, “There is nothing new in the Senate that was not proposed in the House. There, I think leaders were very wise in simplifying it and resisting the temptation to make it look like a Christmas tree, and saying there are certain provisions that have merit, but let's put them on a separate track and let's debate them over time.”
  • A summary of the bill can be accessed via: http://finance.senate.gov/press/Bpress/2008press/prb013008c.pdf

DOJ FILES APPELLANT’S BRIEF IN TEXTRON CASE:  On January 23, 2008, the Office of the Solicitor General authorized a government appeal of the decision in favor of the taxpayer in the Textron case. The government's brief filed in the First Circuit on January 25th argues that the District Court erred in reaching the conclusion that Textron's tax accrual workpapers were protected under the attorney work product doctrine and FRCP 26(b)(3).

TREASURY, IRS PROVIDE TRANSITION GUIDANCE ON PENSION PROTECTION ACT FUNDING RULES:  Today, the Treasury Department and the IRS issued guidance that relates to new pension funding rules that were included in the Pension Protection Act of 2006.

  • According to the Treasury Department, “Notice 2008-21 announces that none of the proposed funding regulations will be effective before the first plan year beginning on or after January 1, 2009, although employers may rely on these regulations during 2008. For plan years beginning before January 1, 2009, the notice provides that employers may generally rely on a reasonable interpretation of the funding rules in the statute and may rely on the proposed regulations for this purpose.
  • The notice also provides transitional relief to small plans for purposes of applying the applicable benefit restrictions for underfunded pension plans for 2008.”
  • The notice can be accessed via: http://www.treas.gov/press/releases/reports/notice2008.pdf
  • For additional information, contact Anne E. Moran – amoran@steptoe.com

TAX BILLS INTRODUCED JANUARY 30TH:
S.2572: A bill to amend the Internal Revenue Code of 1986 to provide for bonus depreciation or an additional minimum tax credit in lieu of such bonus depreciation.
Sponsor: Sen Voinovich, George V. [OH] (introduced 1/30/2008)      Cosponsors (None)

S.2574: A bill to amend the Internal Revenue Code of 1986 to allow the use of qualified mortgage revenue bonds for refinancing mortgages and to provide a temporary increase in the volume cap for such bonds.
Sponsor: Sen Clinton, Hillary Rodham [NY] (introduced 1/30/2008)      Cosponsors (None)

S.2576: A bill to amend the Internal Revenue Code of 1986 to allow a credit for qualified expenditures paid or incurred to replace certain wood stoves.
Sponsor: Sen Crapo, Mike [ID] (introduced 1/30/2008)      Cosponsors (3)

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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