Daily Tax Update - June 26, 2008

SENATE FINANCE HEARS TESTIMONY ON INTERNATIONAL TAX REFORM:  Today, the Senate Finance Committee held a hearing to examine how the government taxes foreign income of US businesses and options for reform.

  • According to the committee, “The panel reviewed the two primary approaches to taxing the foreign income of US-based multinational businesses. The first system, worldwide taxation, taxes all of a business’s activities, no matter where they take place. The second, territorial taxation, taxes only income derived within a country’s borders. Senators weighed aspects of both systems and discussed how each would affect the tax base and the competitiveness of US businesses. Baucus and other Senators questioned how the current US system, an amalgam of both approaches, relates to the way other countries tax multinational businesses, and how changes to the US system could help boost American businesses in the global marketplace. Although witnesses had varying opinions on the best method of reform, all of the experts agreed that some reform was necessary.”  University of Michigan Law School Professor James Hines said, “Put simply, the United States is close to unique among world nations in taxing foreign income in the way that we do. There are sizable, measurable benefits to reforming our tax code.” 
  • Committee Chairman Max Baucus said, “It’s time to consider whether we need to make minor tune-ups to the rules for taxing foreign income, or start from scratch. The way we tax foreign income is important to American investments, American jobs, and American productivity. In order to enhance American competitiveness, we have to ask to what extent the tax code needs reform.” Baucus said that this year’s review of the tax system and reform options should produce a set of principles to guide the work of the Committee and a new Administration on tax reform next year. 
  • In conjunction with the hearing, the Joint Committee on Taxation released a report entitled, “Economic Efficiency and Structural Analyses of Alternative US Tax Policies for Foreign Direct Investment.”
  • The document is available via: http://www.jct.gov/x-55-08.pdf
  • Testimony can be accessed via: http://finance.senate.gov/sitepages/hearing062608.htm

H.R.6368: To amend the Internal Revenue Code of 1986 to provide for an increase in the standard mileage rates to reflect the increase in the cost of highway fuels, and for other purposes.
Sponsor: Rep Brady, Kevin [TX-8] (introduced 6/25/2008)      Cosponsors (6)

H.R.6371: To amend the Internal Revenue Code of 1986 to require employers to notify their employees of the availability of the earned income credit.
Sponsor: Rep Emanuel, Rahm [IL-5] (introduced 6/25/2008)      Cosponsors (7)

H.R.6373: To amend the Internal Revenue Code of 1986 to allow individuals to establish Home Ownership Mortgage Expense Accounts (HOME Accounts) which may be used to purchase, remodel, or make mortgage payments on the principal residence of the taxpayer.
Sponsor: Rep McCotter, Thaddeus G. [MI-11] (introduced 6/25/2008)      Cosponsors (None)

H.R.6374: To amend the Internal Revenue Code of 1986 to repeal the shipping investment withdrawal rules in section 955 and to provide an incentive to reinvest foreign shipping earnings in the United States .
Sponsor: Rep McDermott, Jim [WA-7] (introduced 6/25/2008)      Cosponsors (2)

S.3190: A bill to amend the Internal Revenue Code of 1986 to require employers to notify their employees of the availability of the earned income credit.
Sponsor: Sen Schumer, Charles E. [NY] (introduced 6/25/2008)      Cosponsors (None)

S.3199: A bill to amend the Internal Revenue Code of 1986 to exempt certain shipping from the harbor maintenance tax.
Sponsor: Sen Lautenberg, Frank R. [NJ] (introduced 6/25/2008)      Cosponsors (6)

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 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.