Daily Tax Update - April 28, 2009

SENATOR SPECTER ANNOUNCES HE’S SWITCHING PARTIES:  Today, longtime Republican Senator Arlen Specter of Pennsylvania announced he would switch from the Republican Party to join the Democratic majority. Specter's announcement puts Democrats within one senator of the 60-vote supermajority needed to override filibusters on important matters as health care reform and tax issues. Democrats could pick up their 60th senate seat if Minnesota Democrat Al Franken wins the contested Senate race.

  • Specter said, “I deeply regret that I will be disappointing many friends and supporters. I can understand their disappointment. I am also disappointed that so many in the party I have worked for for more than four decades do not want me to be their candidate. It is very painful on both sides.” Specter added, “My change in party affiliation does not mean that I will be a party-line voter any more for the Democrats that I have been for the Republicans. Whatever my party affiliation, I will continue to be guided by President Kennedy's statement that sometimes party asks too much. When it does, I will continue my independent voting and follow my conscience on what I think is best for Pennsylvania and America.”

BUDGET AGREEMENT INCLUDES $764 BILLION IN MIDDLE-CLASS TAX CUTS:  The House and Senate budget conferees have reached an agreement on the Fiscal Year 2010 budget resolution which provides $764 billion in tax cuts focused on the middle-class. The bill provides reconciliation instructions for health care and education. The full Senate and House are expected to vote on the budget resolution this week.

  • According to the Senate Budget Committee, “The conference agreement provides significant middle-class tax relief. In total, the conference agreement cuts taxes by $764 billion over the next five years.”
  • This tax relief includes:
  • $512 billion to extend middle-class tax cuts, such as the 10 percent bracket, the child tax credit, marriage penalty relief, and education incentives, as well as the other 2001 and 2003 tax cuts extended in the President’s budget for taxpayers making under $250,000;
  • $214 billion for three years of AMT reform;
  • $72 billion to match the President’s estate tax reform proposal – which would permanently extend the 2009 level of a $7 million exemption for couples and $3.5 million for individuals;
  • $54 billion for two years of extenders; and
  • $9 billion for other tax cuts.
  • The conference agreement allows for the extension of the President’s Making Work Pay tax credit beyond 2010 through its deficit-neutral reserve funds.
  • The conference agreement includes $97 billion in “loophole closers and raisers.” The specifics of these proposals will be developed by the Finance and Ways and Means Committees.

TAX BILLS INTRODUCED APRIL 27TH:
H.R.2105: To amend the Internal Revenue Code of 1986 to treat certain amounts paid for physical activity, fitness, and exercise as amounts paid for medical care.
Sponsor: Rep Kind, Ron [WI-3] (introduced 4/27/2009)      Cosponsors (3)

H.R.2106: To amend the Internal Revenue Code of 1986 to expand workplace health incentives by equalizing the tax consequences of employee athletic facility use.
Sponsor: Rep Kind, Ron [WI-3] (introduced 4/27/2009)      Cosponsors (1)

H.R.2122: To amend the Internal Revenue Code of 1986 to provide a special rule for allocating the cover over of distilled spirits taxes between Puerto Rico and the Virgin Islands.
Sponsor: Rep Pierluisi, Pedro R. [PR] (introduced 4/27/2009)      Cosponsors (4)

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.