Daily Tax Update - April 17, 2009

CONGRESS RETURNS NEXT WEEK TO RECONCILE BUDGET:  Congress returns from its two-week spring recess on Monday. Among the upcoming issues that need to be resolved are the differing House and Senate Fiscal Year 2010 budget resolutions. A conference committee must reconcile the differences in the two bills followed by both chambers approving the final bill. After Congress passes its budget resolution, it will begin work on the regular FY 2010 appropriations measures and the supplemental spending bill.

  • House Speaker Nancy Pelosi said many of the appropriations bills should be on the House floor by June.  Pelosi said, “We have a full agenda. And we will have the Memorial Day break in between there, but between now and June 30th, when the appropriations bills should be done, we hope to have much of that work done.” Pelosi added, “The other issues that we will be dealing with deal with issues that relate to the financial crisis in our country, and especially how they affect individuals in our country, whether it is predatory lending, credit card reform, stopping mortgage scams, those kinds of initiatives. And then working with the White House on financial oversight and reform, including expanding or addressing the Federal Reserve authority.”
  • The House budget resolution provides for $613.2 billion in tax relief over the five-year period and assumes the proposal will raise $14.3 trillion in tax revenue. The Senate budget resolution provides for $825 billion in tax relief over the five-year period and assumes $14.1 trillion in revenues.

MISCELLANEOUS GUIDANCE ISSUED:
Revenue Ruling 2009-12 announces the applicable federal interest rates and adjusted applicable federal rates for May 2009. The short-term annual applicable federal rate is .76 percent, the midterm annual applicable federal rate is 2.05 percent, and the long-term rate is 3.58 percent. As for the annual adjusted federal rates, the short-term rate is .80 percent, the midterm rate is 2.39 percent, and the long-term rate is 4.58 percent. The revenue ruling can be accessed here.

Revenue Ruling 2009-11 (released April 16) provides that differential pay that employers pay to their employees that leave their job to go on active military duty is subject to income tax withholding, but is not subject to Federal Insurance Contributions Act (“FICA”) or Federal Unemployment Tax Act (“FUTA”) taxes.  Additionally, the ruling provides that employers may use the aggregate procedure or optional flat rate withholding to calculate the amount of income taxes required to be withheld on these payments, and that these payments must be reported on Form W-2.

Notice 2009-37 (released April 16) announces the phase-out of the new qualified hybrid motor vehicle credit for passenger automobiles and light trucks and the new advanced lean burn technology motor vehicle credit for vehicles manufactured by Ford Motor Company that are purchased for use or lease in the United States beginning on April 1, 2009.

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
Steptoe & Johnson LLP has one of the largest and most diverse law firm tax practices in the country. The practice covers the entire spectrum of federal taxation, including representation of businesses before the Congress, Treasury and the national office of the IRS; transactional planning for domestic and multinational corporations; complex audit and controversy work for corporations and other business interests contesting IRS adjustments; litigation before the Tax Court, Court of Federal Claims, district courts, courts of appeals and the Supreme Court. The firm's tax practice also encompasses all aspects of employee benefits (ERISA), executive compensation, tax-exempt organizations and charitable giving. Steptoe has an extensive state and local tax practice, representing an array of business clients on complex sales and use tax, corporate income tax and property tax matters, both advising those clients and handling audits, administrative appeals, and litigation for them. Read more information on Steptoe's tax practice.