Daily Tax Update - June 25, 2008

TREASURY RELEASES NEW GUIDANCE ON HEALTH SAVINGS ACCOUNTS:  Today, the Treasury Department and the IRS released Notice 2008-59, which provides employers and employees with a new set of formal questions and answers on Health Savings Accounts (HSAs).

Notice 2008-59 contains over 40 new frequently asked questions and answers that cover a wide range of topics, including:

HOUSE PASSES OFFSET AMT PATCH BILL:  Today, the House passed (by a vote of 233 to 189) the Alternative Minimum Tax Relief Act of 2008 (H.R. 6275). The $61.5 billion legislation provides one-year of relief from the AMT and is fully offset. 

  • The offsets in the bill include changing the taxation of carried interest, denying the Section 199 manufacturing deduction for certain major integrated oil companies, setting a limitation on treaty benefits for certain deductible payments, and requiring information returns for merchant credit card payments.
  • The Administration issued a veto threat yesterday expressing opposition to the revenue offsets in the bill. The Statement of Administration Policy stated, “The Administration strongly opposes the provision in H.R. 6275 that would increase the tax burden on American businesses and workers by raising taxes on certain partners in partnerships. This additional tax burden would also harm the US economy. The Administration also strongly opposes the bill's provision to raise taxes on payments by US subsidiaries to foreign affiliates. This provision would discourage foreign investment in the United States and override US tax treaties with many nations. Foreign investment in the United States leads to higher-paying American jobs and strengthens economic growth. This provision would adversely affect US wages as well as relationships with the Nation's major trading partners and could provoke retaliation through higher foreign taxes on US firms. In addition, the Administration strongly opposes H.R. 6275's provision to limit the availability of the domestic production deduction for certain oil companies, which singles out a specific industry to be denied a deduction generally available to others.”

FINANCE SCHEDULES HEARING ON INTERNATIONAL TAX REFORM:  On June 26, the Senate Finance Committee will convene a hearing to examine how the government taxes foreign income of US businesses and options for reform. The hearing is entitled, “The Foundation of International Tax Reform: Worldwide, Territorial, and Something in Between.”

TAX BILL INTRODUCED JUNE 24th:
H.R.6352: To amend the Internal Revenue Code of 1986 to allow a credit against income tax for contributions to a trust used to provide need-based college scholarships.
Sponsor: Rep Fattah, Chaka [PA-2] (introduced 6/24/2008)      Cosponsors (None)

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.