Daily Tax Update - April 30, 2009

Congress passes budget resolution:  Yesterday, after the House passed the budget resolution in a 233-193 vote, the Senate passed the budget resolution in a 53-43 vote. House Speaker Nancy Pelosi characterized the budget as a “bookend” to the stimulus package and “the foundation for how we go forward into the future.” House Majority Leader Steny Hoyer said of the budget resolution, “Finally, this budget puts America back on the path of fiscal responsibility. It’s no secret that past budgets have made easy choices and kicked the difficult ones down the road...But by passing this budget, we will be leaving a different legacy: one that makes clear that our government must pay for what it buys.” The fiscal responsibility Representative Hoyer was referring to will come through a commitment to the budget resolution’s pay-go requirements, which, according to Hoyer, will cut the deficit to 3% of GDP in 2014 from 10.5% in 2009.

  • Senate Finance Committee Ranking Member Chuck Grassley believes that because the budget resolution allows the top two marginal rates to expire in 2011, the marginal tax rates of small business owners in the top two brackets will increase by approximately 20%. Grassley claims, “The bottom line is the budget contains a tax increase that is aimed at small businesses most likely to expand or contract. That tax increase is significant and real to those small business owners. They, not the politicians voting in the tax increase, will have to deal with the added tax burden.” In 2011, the highest two marginal rates will increase from 33% and 35% to 40% and 41%, respectively.

MISCELLANEOUS GUIDANCE ISSUED TODAY:
Notice 2009-42 hereby substitutes “June 30, 2009,” for “April 30, 2009” where it appears in Notice 2009-31.

On March 27, 2009, the Service issued Notice 2009-31, 2009-16 I.R.B. 856, providing guidance to multiemployer plans making elections described in sections 204 and 205 of the Worker, Retiree, and Employer Recovery Act of 2008, P.L. 110-458 (WRERA). This notice extends the time period for making elections described in section 204 of the WRERA.

TAX BILLS INTRODUCED APRIL 29th:
H.R.2168: To amend the Internal Revenue Code of 1986 to suspend the penalty on underpayments of Federal income tax for unemployed individuals.
Sponsor: Rep Duncan, John J., Jr. [TN-2] (introduced 4/29/2009)      Cosponsors (None)

S.922: A bill to amend the Internal Revenue Code of 1986 to modify the term “5-year property”.
Sponsor: Sen Murkowski, Lisa [AK] (introduced 4/29/2009)      Cosponsors (None)
Committees: Senate Finance

S.929: A bill to amend the Internal Revenue Code of 1986 to provide a Federal income tax credit for the purchase of certain nonroad equipment powered by alternative power sources.
Sponsor: Sen Leahy, Patrick J. [VT] (introduced 4/29/2009)      Cosponsors (1)

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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