Daily Tax Update - February 4, 2009

TREASURY ANNOUNCES NEW RESTRICTIONS ON EXECUTIVE COMPENSATION:  Today, Treasury Department issued a new set of guidelines on executive pay for financial institutions that are receiving government assistance. Treasury said, “These measures are designed to ensure that public funds are directed only toward the public interest in strengthening our economy by stabilizing our financial system and not toward inappropriate private gain. The measures announced today are designed to ensure that the compensation of top executives in the financial community is closely aligned not only with the interests of shareholders and financial institutions, but with the taxpayers providing assistance to those companies.” 

  • According to Treasury, “The chief executive officers of all companies that have to this point received or do receive any form of government assistance must provide certification that the companies have strictly complied with statutory, Treasury, and contractual executive compensation restrictions. Chief executive officers must re-certify compliance with these restrictions on an annual basis. In addition, the compensation committees of all companies receiving government assistance must provide an explanation of how their senior executive compensation arrangements do not encourage excessive and unnecessary risk-taking.” Today’s guidance also limits the total amount of compensation to no more than $500,000 for companies receiving "exceptional financial recovery assistance" except for restricted stock awards.  
  • The Treasury intends to issue proposed guidance subject to public comment on executive compensation requirements relating to future generally available capital access programs.
  • For additional information, contact Anne E. Moran - amoran@steptoe.com
  • Treasury’s press release can be accessed here

SENATE APPROVES TAX BREAKS FOR NEW CAR BUYERS:  Last night, the Senate approved an amendment offered by Sen. Barbara Mikulski (D-MD) that would make interest payments on car loans, as well as state sales and excise taxes, deductible for vehicles purchased in 2009. The total cost of the stimulus bill is now approximately $902 billion. Mikulski said, “This amendment is actually about creating jobs. Our automobile industry is languishing. For the consumers, it means they get a deal: It’s a market incentive to get them into the showroom.”  

  • The Senate also passed an amendment sponsored by Sen. Tom Coburn (R-OK) to strike a $246 million tax earmark for Hollywood production companies. The Senate failed to pass an amendment sponsored by Sens. Barbara Boxer (D-CA) and John Ensign (R-NV) that would have renewed for one year the section 965 tax holiday on repatriated corporate dividends.
  • Meanwhile, Sens. Ben Nelson (D-NE) and Susan Collins (R-ME) are drafting an amendment that Nelson said would cut "tens of billions" of "nonstimulative" spending from the bill.
  • Today, the President said, “The economic crisis we face is unlike any we’ve seen in our lifetime. It’s a crisis of falling confidence and rising debt, of widely distributed risk and narrowly concentrated reward. A failure to act, and act now, will turn crisis into catastrophe and guarantee a longer recession, a less robust recovery and a more uncertain future.” Obama added, “No plan is perfect, and we should work to make it stronger. But let’s not make the perfect the enemy of the essential.”
  • Votes on amendments can be accessed here

TAX BILLS INTRODUCED FEBRUARY 3RD:
H.R.793: To amend the Internal Revenue Code of 1986 to make permanent the child tax credit and to allow for adjustments for inflation with respect to the child tax credit.
Sponsor: Rep Posey, Bill [FL-15] (introduced 2/3/2009)      Cosponsors (31)

H.R.796: To amend the Internal Revenue Code of 1986 to repeal the authority of the Secretary of the Treasury to enter into private debt collection contracts.
Sponsor: Rep Lewis, John [GA-5] (introduced 2/3/2009)      Cosponsors (15)

H.R.802: To amend the Internal Revenue Code of 1986 to extend and modify the first-time homebuyer credit.
Sponsor: Rep Heller, Dean [NV-2] (introduced 2/3/2009)      Cosponsors (None)

H.R.810: To amend the Internal Revenue Code of 1986 to provide a tax credit to employers for the value of the service not performed during the period employees are performing service as members of the Ready Reserve or the National Guard.
Sponsor: Rep Bilirakis, Gus M. [FL-9] (introduced 2/3/2009)      Cosponsors (None)

H.R.832: To amend the Internal Revenue Code of 1986 to extend the financing of the Superfund.
Sponsor: Rep Pallone, Frank, Jr. [NJ-6] (introduced 2/3/2009)      Cosponsors (1)

H.R.836: To amend the Internal Revenue Code of 1986 to reduce the tax on beer to its pre-1991 level, and for other purposes.
Sponsor: Rep Pomeroy, Earl [ND] (introduced 2/3/2009)      Cosponsors (11)

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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