Daily Tax Update - January 22, 2009

WAYS AND MEANS EXPECTED TO APPROVE TAX PROVISIONS IN ECONOMIC RECOVERY BILL:  Later today, the House Ways and Means Committee is expected to approve the tax title of the “American Recovery and Tax Reinvestment Act of 2009” (H.R. 598). A substitute amendment offered by Committee Chairman Charles Rangel increased the tax portion of the stimulus plan to $303 billion. The Chairman's substitute amendment modifies the use of the five-year carryback of operating losses provision. 

  • The Chairman’s amendment also clarifies that language repealing Notice 2008-83 related to the used of built-in losses would only apply to “an ownership change occurring after January 16, 2009, that was described on or before such date in a public announcement, or in a filing with the Securities and Exchange Commission.” According to the Joint Committee on Taxation, the provision is expected to raise approximately $7 billion in revenue, thus reducing the net cost of the tax part of the stimulus package to $296 billion.
  • A summary of the Chairman’s mark in the nature of a substitute can be accessed here.
  • Also today, the House Appropriations Committee approved $358 billion in spending that would be included in the stimulus bill. Committee Chairman David Obey said, “I'm sure that none of you are happy with the cost, neither am I, but the cost has to be measured against the size of the problem. We face the most dangerous economic collapse since the '30s.”

THE FIRST CIRCUIT AFFIRMS WORK PRODUCT PROTECTION FOR TAXPAYER'S TAX ACCRUAL WORKPAPERS IN TEXTRON AND REMANDS ON RELATED ISSUES REGARDING AUDITOR'S WORKPAPERS:  Yesterday, the First Circuit affirmed a district court decision that the work product doctrine protected tax accrual workpapers prepared by Textron from disclosure to the IRS. These workpapers listed issues that Textron determined could be challenged by the IRS on audit, and set forth Textron's hazards of litigation assessment for each issue. The district court held that the workpapers were protected under the work product doctrine and that Textron did not waive this protection by disclosing the workpapers to its attest auditors. The government argued unsuccessfully before the First Circuit that these workpapers were prepared in the ordinary course of business and not in anticipation of litigation and, as a result, could not be protected under the work product doctrine. The First Circuit concluded that the “ordinary course of business” exception to the work product doctrine cannot be applied to require disclosure of all documents prepared with some business purpose in mind. Accordingly, the First Circuit found that dual purpose documents prepared by Textron may be protected under the work product doctrine. Although affirming the holding of the district court regarding work product protection, the First Circuit remanded the case to the district court to resolve subsidiary issues involving workpapers prepared by Textron's attest auditors. 

FINANCE COMMITTEE APPROVES TREASURY SECRETARY’S NOMINATION:  Today, the Senate Finance Committee approved the nomination of Timothy Geithner as Treasury Secretary by a vote of 18-5.  Voting against the nomination were the Committee’s ranking member, Sen. Charles Grassley (R-IA), and Republican members Sens. Jon Kyl (AZ), Jim Bunning (KY), Pat Roberts (KS), and Mike Enzi (WY). Geithner’s nomination now goes to the full Senate for final approval.

  • Sen. Kent Conrad (D-ND) said, “I find it completely unacceptable" that Geithner did not pay certain taxes. Conrad added, “In normal times, that alone would lead me to oppose his nomination. But these are not normal times.” 
  • The Committee released various questions for the record from Geithner.
  • The document can be accessed here

REPUBLICAN MEMBERS OF FINANCE COMMITTEE NAMED:  Sens. John Cornyn (R-TX) and Mike Enzi (R-WY) were selected to serve on the Senate Finance Committee.

Notice 2009-15 sets forth the manner in which the Treasury Department and the Internal Revenue Service will determine and announce the credit rates for certain tax credit bonds for purposes of sections 54, 54A, 1400N(l), and similar provisions.
Notice 2009-15 will appear in IRB 2009-6, dated Feb. 9, 2009.

H.R.617: To amend the Internal Revenue Code of 1986 to eliminate the taxable income limit on percentage depletion for oil and natural gas produced from marginal properties.
Sponsor: Rep Boren, Dan [OK-2] (introduced 1/21/2009)      Cosponsors (None)

H.R.620: To amend the Internal Revenue Code of 1986 to allow an increased work opportunity credit with respect to recent veterans.
Sponsor: Rep King, Peter T. [NY-3] (introduced 1/21/2009)      Cosponsors (None)

H.R.622: To amend the Internal Revenue Code of 1986 to expand the credit for renewable electricity production to include electricity produced from biomass for on-site use.
Sponsor: Rep Michaud, Michael H. [ME-2] (introduced 1/21/2009)      Cosponsors (2)

S.284: A bill to amend the Internal Revenue Code of 1986 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: Sen Menendez, Robert [NJ] (introduced 1/21/2009)      Cosponsors (None)

S.285: A bill to amend the Internal Revenue Code of 1986 to provide that reimbursements for costs of using passenger automobiles for charitable and other organizations are excluded from gross income, and for other purposes.
Sponsor: Sen Feingold, Russell D. [WI] (introduced 1/21/2009)      Cosponsors (None)

S.287: A bill to amend the Internal Revenue Code of 1986 to provide for the full deduction allowable with respect to income attributable to domestic production activities, and for other purposes.
Sponsor: Sen Inhofe, James M. [OK] (introduced 1/21/2009)      Cosponsors (None)

S.288: A bill to amend the Internal Revenue Code of 1986 to permanently extend the depreciation rules for property used predominantly within an Indian reservation.
Sponsor: Sen Inhofe, James M. [OK] (introduced 1/21/2009)      Cosponsors (1)

S.289: A bill to amend the Internal Revenue Code of 1986 to eliminate the taxable income limit on percentage depletion for oil and natural gas produced from marginal properties.
Sponsor: Sen Inhofe, James M. [OK] (introduced 1/21/2009)      Cosponsors (1)

S.294: A bill to amend the Internal Revenue Code of 1986 to extend and modify the special allowance for property acquired during 2009 and to temporarily increase the limitation for expensing certain business assets.
Sponsor: Sen Specter, Arlen [PA] (introduced 1/21/2009)      Cosponsors (None)

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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