Daily Tax Update - December 10, 2008

ADMINISTRATION AND DEMOCRATS REACH “CONCEPTUAL AGREEMENT” ON AUTO BAILOUT BILL:  The White House and Democratic congressional leaders have reached a tentative agreement on a $15 billion emergency loan program for the auto industry. But the agreement must still overcome objections from Republicans in order to pass the Senate. Earlier today, a White House spokesman said, "After a lot of negotiation and discussion, we've made very substantial progress and have a good conceptual agreement. There's still a lot of drafting going on up on Capitol Hill and language being exchanged back and forth, so I don't want to say that there is agreement, because there's never agreement until you've actually seen the text and know what's in there and what the members will be called upon to vote on. But as I say, very good progress on a conceptual agreement.” A House vote could occur later today. A similar bill has been introduced in the Senate.

  • A group of Senate Republicans spoke out in opposition to the bill today. Senate Banking Committee ranking member Richard Shelby, Sen. John Ensign, and others stated that they would oppose the bill. Shelby said, “This bill is only delaying their (automakers) funeral.” The bill must secure 60 votes in the Senate to move forward.
  • Senate Finance Committee Chairman Max Baucus and ranking member Charles Grassley are objecting to a provision in the bill that would “assist participants in controversial tax shelters which have been shut down by both the IRS and Congress.” Today, Grassley said, “The federal government should not guarantee the transit agencies’ obligations to corporations, including foreign corporations, when doing so allows the tax shelter to continue and these corporations, including foreign corporations, to continue taking tax shelter deductions for things such as transit agencies’ train cars. If the federal government is called upon to pay the guarantees of the transit agencies’ obligations to these tax shelter corporations, including foreign tax shelter corporations, then US taxpayers will be sending money directly to these foreign corporations and others.”
  • Senate Majority Leader Harry Reid said a vote would not occur today. Reid said, “If everybody is not cooperative and wants to create problems here, we wouldn’t be able to complete this until Saturday or Sunday. And when I say, ‘complete it,’ that means we’re going to have a final vote on it. It will either pass or fail, but we are going to give the Senators an opportunity to vote on this.”
  • A summary of the House bill can be accessed here and the text can be accessed here

IRS COMMISSIONER NAMES POTTER AS ACTING CHIEF COUNSEL:  Today, IRS Commissioner Douglas Shulman announced that Clarissa Potter will serve as acting chief counsel when the current Chief Counsel Donald Korb leaves his post later this month.

CAMP NAMED NEXT WAYS AND MEANS COMMITTEE RANKING MEMBER:  Today, the House Republican Steering Committee nominated Rep. Dave Camp (R-MI) to serve as the next ranking member of the House Ways and Means Committee for the 111th Congress.

MISCELLANEOUS GUIDANCE ISSUED TODAY:
Notice 2008-115 provides guidance to employers and payers on their reporting and wage withholding requirements for calendar year 2008 with respect to deferrals of compensation and amounts includible in gross income under section 409A of the Internal Revenue Code.  In addition, this notice provides guidance to service providers on their income tax reporting and tax payment requirements with respect to amounts includible in gross income under section 409A.

Revenue Procedure 2008-68 provides temporary guidance regarding certain stock distributions by publicly traded corporations that are real estate investment trusts (REITs). For stock dividends declared on or after January 1, 2008 and before December 31, 2009, the Service will treat a stock distribution by a publicly traded real estate investment trust (REIT) pursuant to a stock-in-lieu-of-money election (under the terms defined in the revenue procedure) as a distribution of property to which section 301 applies by reason of section 305(b), and the amount of such distribution of stock will be considered to equal the amount of the money which could have been received instead.

TAX BILLS INTRODUCED DECEMBER 9TH
H.R.7308: To amend the Internal Revenue Code of 1986 to ensure that all taxpayers have the ability to deduct State and local general sales taxes.
Sponsor: Rep Blackburn, Marsha [TN-7] (introduced 12/9/2008)      Cosponsors (3)

H.R.7309: To amend the Internal Revenue Code of 1986 to suspend employment and income taxes for the first two months of 2009, and for other purposes.
Sponsor: Rep Gohmert, Louie [TX-1] (introduced 12/9/2008)      Cosponsors (20)

H.R.7314: To amend the Internal Revenue Code of 1986 to provide tax relief to the unemployed, and for other purposes.
Sponsor: Rep Michaud, Michael H. [ME-2] (introduced 12/9/2008)      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
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