Daily Tax Update - January 15, 2009

$825 BILLION ECONOMIC RECOVERY PACKAGE OUTLINED:  Today, House Speaker Nancy Pelosi and House Democrats summarized an $825 billion stimulus package (“The American Recovery and Reinvestment Bill of 2009”) that includes $550 billion in spending and $275 billion in tax cuts to individuals and businesses over two years. Pelosi said, “This is the first step in the process.” The Senate is developing its own version of a recovery package.

  • Also today, House Ways and Means Committee Chairman Charles Rangel released the details of the economic recovery package falling under the jurisdiction of the Committee. Rangel said that the stimulus bill would be formally introduced in the coming days and is expected to receive consideration in the Ways and Means Committee next week. 
  • In addition to the tax provisions outlined below, the bill also includes $87 billion for a temporary increase in aid to states for Medicaid costs; $79 billion in aid to local school districts and public colleges to prevent cutbacks; $90 billion in infrastructure spending; and $54 billion to encourage the production of energy from renewable sources. A one-year patch of the alternative minimum tax was not included in the bill.
  • The bill includes:
    • Tax Relief for Individuals:
      • “Making Work Pay Credit”
      • Expand Earned Income Tax Credit (EITC)
      • Increase in child tax credit, $0 floor
    • Business Tax Provisions:
      • Bonus depreciation
      • 5-year carryback of net operating losses (excluding companies receiving TARP benefits, Fannie Mae, and Freddie Mac)
      • Extension of increased small business expensing
      • Expand work opportunity tax credit for disconnected youth and unemployed, recently-discharged veterans
      • Prospectively repeal Treasury Section 382 ruling
    • State and Local Governments: 
      • Allow financial institutions to purchase State and local bonds and other changes
      • Repeal AMT limits on new private activity bonds
      • Taxable bond option for governmental bonds
      • School construction bonds
      • One year deferral of withholding tax on government contractors
  • Additional information can be accessed here and here.

MISCELLANEOUS GUIDANCE ISSUED TODAY:
Notice 2009-12 explains how to allocate the first-time homebuyer credit under section 36 of the Code between unmarried co-purchasers of a principal residence.

TAX BILLS INTRODUCED JANUARY 14TH:
H.R.497: To amend the Internal Revenue Code of 1986 to provide incentives for improving mine safety.
Sponsor: Rep Ellsworth, Brad [IN-8] (introduced 1/14/2009)      Cosponsors (2)

H.R.502: To amend the Internal Revenue Code of 1986 to improve health care choice by providing for the tax deductibility of medical expenses by individuals.
Sponsor: Rep Bachmann, Michele [MN-6] (introduced 1/14/2009)      Cosponsors (16)

H.R.507: To amend the Internal Revenue Code of 1986 to allow a temporary dividends received deduction for taxable years beginning in 2008 or 2009.
Sponsor: Rep Brady, Kevin [TX-8] (introduced 1/14/2009)      Cosponsors (2)

H.R.510: To amend the Internal Revenue Code of 1986 to require that the payment of the manufacturers' excise tax on recreational equipment be paid quarterly.
Sponsor: Rep Kind, Ron [WI-3] (introduced 1/14/2009)      Cosponsors (12)

H.R.517: To amend the Internal Revenue Code of 1986 to modify the dependent care credit to take into account expenses for care of parents and grandparents who do not live with the taxpayer.
Sponsor: Rep Israel, Steve [NY-2] (introduced 1/14/2009)      Cosponsors (5)

H.R.518: To amend the Internal Revenue Code of 1986 to consolidate the current education tax incentives as one credit against income tax for qualified tuition and related expenses.
Sponsor: Rep Israel, Steve [NY-2] (introduced 1/14/2009)      Cosponsors (5)

H.R.524: To amend the Internal Revenue Code of 1986 to allow the Secretary of the Treasury to establish the standard mileage rate for use of a passenger automobile for purposes of the charitable contributions deduction and to exclude charitable mileage reimbursements from gross income.
Sponsor: Rep Lewis, John [GA-5] (introduced 1/14/2009)      Cosponsors (5)

H.R.525: To amend the Internal Revenue Code of 1986 to repeal the recapture rule of the first-time homebuyer credit and to extend the application of the credit through 2009.
Sponsor: Rep Lewis, John [GA-5] (introduced 1/14/2009)      Cosponsors (None)

H.R.528: To amend the Internal Revenue Code of 1986 to exempt certain shipping from the harbor maintenance tax.
Sponsor: Rep McHugh, John M. [NY-23] (introduced 1/14/2009)      Cosponsors (None)

H.R.532: To amend the Internal Revenue Code of 1986 to modify the annual contribution limit for Coverdell education savings accounts.
Sponsor: Rep Neugebauer, Randy [TX-19] (introduced 1/14/2009)      Cosponsors (None)

H.R.536: To amend the Internal Revenue Code of 1986 to strengthen the earned income tax credit.
Sponsor: Rep Pascrell, Bill, Jr. [NJ-8] (introduced 1/14/2009)      Cosponsors (1)

H.R.537: To amend the Internal Revenue Code of 1986 to provide that the volume cap for private activity bonds shall not apply to bonds for facilities for the furnishing of water and sewage facilities.
Sponsor: Rep Pascrell, Bill, Jr. [NJ-8] (introduced 1/14/2009)      Cosponsors (2)

H.R.538: To amend the Internal Revenue Code of 1986 to reduce the earned income threshold applicable to the refundable portion of the child tax credit and to increase the age limit for such credit.
Sponsor: Rep Pascrell, Bill, Jr. [NJ-8] (introduced 1/14/2009)      Cosponsors (1)

H.R.541: To amend the Internal Revenue Code of 1986 to provide for an inflation adjustment of the base amounts used to determine the amount of Social Security benefits included in gross income.
Sponsor: Rep Platts, Todd Russell [PA-19] (introduced 1/14/2009)      Cosponsors (1)

H.R.543: To amend the Internal Revenue Code of 1986 to reduce the rate of the tentative minimum tax for noncorporate taxpayers to 24 percent.
Sponsor: Rep Royce, Edward R. [CA-40] (introduced 1/14/2009)      Cosponsors (1)

H.R.544: To amend the Internal Revenue Code of 1986 to allow amounts in a health flexible spending arrangement that are unused during a plan year to be carried over to subsequent plan years or deposited into certain health or retirement plans.
Sponsor: Rep Royce, Edward R. [CA-40] (introduced 1/14/2009)      Cosponsors (None)

H.R.546: To amend the Internal Revenue Code of 1986 to treat certain solar energy credits as refundable credits, to allow a new refundable credit for equipment used to manufacture solar energy property, to waive the application of the subsidized financing rules to such property, and for other purposes.
Sponsor: Rep Thompson, Mike [CA-1] (introduced 1/14/2009)      Cosponsors (1)

S.233: A bill to amend the Internal Revenue Code of 1986 to make the allowance of bonus depreciation and the increased expensing limitations permanent.
Sponsor: Sen Alexander, Lamar [TN] (introduced 1/14/2009)      Cosponsors (None)

S.243: A bill to amend the Internal Revenue Code of 1986 to allow the Secretary of the Treasury to establish the standard mileage rate for use of a passenger automobile for purposes of the charitable contributions deduction and to exclude charitable mileage reimbursements for gross income.
Sponsor: Sen Cardin, Benjamin L. [MD] (introduced 1/14/2009)      Cosponsors (11)

S.249: A bill to amend the Internal Revenue Code of 1986 to qualify formerly homeless youth who are students for purposes of low income tax credit.
Sponsor: Sen Stabenow, Debbie [MI] (introduced 1/14/2009)      Cosponsors (2)

S.250: A bill to amend the Internal Revenue Code of 1986 to provide a higher education opportunity credit in place of existing education tax incentives.
Sponsor: Sen Schumer, Charles E. [NY] (introduced 1/14/2009)      Cosponsors (8) 

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.

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