Daily Tax Update - June 8, 2009

SENATORS INTRODUCE R&D TAX CREDIT BILL:  Today, Senate Finance Committee Chairman Max Baucus (D-MT) and Senator Orrin Hatch (R-UT), along with Senators John Kerry (D-MA), Blanche Lincoln (D-AR), Ron Wyden (D-OR), Chuck Schumer (D-NY), Maria Cantwell (D-WA), John Ensign (R-NV), Robert Menendez (D-NJ), and John Cornyn (R-TX) introduced legislation to improve and simplify the research and development (R&D) tax credit. 

  • Under current law, the R&D provision is composed of two credits – a traditional credit and the alternative simplified credit – both of which provide US firms a tax credit for incremental qualifying research expenses, such as labor and equipment costs. The Baucus-Hatch proposal would allow the traditional credit to expire in 2010 and increase the alternative simplified credit, which is currently set at 14 percent of qualifying expenses, to 20 percent of qualifying expenses. Companies would be given the option to claim the credit under current law in 2009 and 2010 in order to have time to adjust their accounting and effectively shift to the new, improved simplified credit.  

PRINCIPLES FOR HEALTH CARE REFORM EXPECTED TO EMERGE THIS WEEK:  Tomorrow, House Ways and Means Committee Chairman Charles Rangel is expected to release a set of principles for reforming health care to the Democratic Caucus. Rangel's draft is not expected to contain specific financing options. Rangel recently said that all revenue raisers were “on the table”—but also said “the table is slanted; a lot of stuff slides off the table.”

  • Likewise, the Senate Finance Committee is expected to release its draft version of a health care reform bill this week. Last month, the Finance Committee circulated a set of health care funding options, which included the Administration’s “Green Book” and other “lifestyle” revenue raisers. 

  • The proposals from the tax-writing committees will eventually be crafted into bills from the House Energy and Commerce and Senate Labor Committees.  House Speaker Nancy Pelosi said that she wants a House vote on the bill before the August recess. 

  • Meanwhile, Congress will try again this week to reach an agreement on the supplemental war spending bill.

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 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.

Learn more about the members of the tax practice group.