Daily Tax Update - February 6, 2009

SENATE DEBATE ON STIMULUS BILL CONTINUES AS MODERATES WORK ON COMPROMISE PLAN:  A bipartisan group of almost 20 centrist Senators is still working on a compromise plan to cut about $100 billion from the stimulus bill. The group is led by Senators Nelson (D-NE) and Susan Collins (R-ME). If a compromise is produced, Senate Majority Leader Reid said he would try to hold a vote later today on the compromise and also a vote on final passage of the bill. Reid said he was “confident we'll have something we can vote on” by late afternoon or early evening. Earlier today, Reid said, “The world is waiting to see what we're going to do in the next 24 hours.”

  • The Democrats will need the support of at least two Republicans and probably more to win passage of the stimulus bill, which requires 60 votes for procedural reasons. Only 57 out of the 58 Democratic Senators have been voting this week. Senator Kennedy has been absent because of illness.
  • Today, President Obama said, “It is inexcusable and irresponsible to get bogged down in distraction and delay while millions of Americans are being put out of work. It is time for Congress to act. It is time to pass an Economic Recovery and Reinvestment Plan to get our economy moving again.” Obama added, “I hope they share my sense of urgency and draw the same unmistakable conclusion: The situation could not be more serious. These numbers demand action.”
  • Amendments approved yesterday include: a provision by Senator Dodd that would strengthen the “clawback” provisions and limits on the executive compensation restrictions originally placed in the Emergency Economic Stabilization Act and a provision by Senators McCaskill and Sanders that would cap the compensation for officers, directors, and all employees of companies receiving TARP money at the same salary as the president of the United States, currently $400,000. The amendment would put the salary cap in place for all financial institutions that have already received bailout money or will get money in the future. An amendment by Senators Dorgan was also approved that would require businesses receiving federal bailout funds to provide public disclosure of any bonuses paid to employees and to better track the number of jobs created and saved from the stimulus plan. Senator Dorgan withdrew his amendment that would have eliminated the ability for US companies to defer taxes on income earned overseas.
  • The Senate defeated an amendment by Senators McCain and Thune that would have eliminated the stimulus bill's spending provisions and instead used a series of tax cuts.

MISCELLANEOUS GUIDANCE ISSUED TODAY:
Announcement 2009-06 addressed new section 6050W of the Internal Revenue Code that requires information reporting for payment card and third party payment network transactions, effective for returns for calendar years beginning after December 31, 2010.  Entities required to report must perform backup withholding if the payee fails to furnish a correct Taxpayer Identification Number (“TIN”).  The Announcement will alert 6050W filers that they may now participate in the TIN matching program.

Notice 2009-17 invites public comments regarding guidance to be provided to brokers, transferors, issuers, customers, and other affected persons concerning new requirements with respect to the reporting of a customer’s basis in securities transactions and new rules for determining the basis of certain securities subject to the new reporting requirements.  These new requirements and rules generally begin to take effect on January 1, 2011.  Interested parties are invited to submit comments on this notice by Monday, March 2, 2009. 

Notice 2009-16 provides guidance as to the corporate bond weighted average interest rate and the permissible range of interest rates specified under § 412(b)(5)(B)(ii)(II) of the Internal Revenue Code. It also provides guidance on the corporate bond monthly yield curve (and the corresponding spot segment rates), the 24-month average segment rates and the funding transitional segment rates under § 430(h)(2). In addition, this notice provides guidance as to the interest rate on 30-year Treasury securities under § 417(e)(3)(A)(ii)(II) as in effect for plan years beginning before 2008, and the minimum present value segment rates under § 417(e)(3)(D) as in effect for plan years beginning after 2007.

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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