Daily Tax Update - June 9, 2009

PRESIDENT OBAMA CALLS FOR RESTORING STATUTORY PAY/GO REQUIREMENTS:  Today, in a White House meeting with Democrats, President Obama called for a return to statutory pay-as-you-go requirements. The President said, “This is a rule I championed in the Senate and called for time and again on the campaign trail. Today, with the support of these legislators...my administration is submitting to Congress a proposal to codify this rule in law-and I hope that the House and Senate will act quickly to pass it.” The President added, “Congress can only spend a dollar if it saves a dollar elsewhere. It is no coincidence...that when this rule was abandoned, we returned to record deficits that doubled the national debt.”

  • According to the White House, “The President’s plan makes clear that, to spend a dollar, Congress must offset the cost. The Office of Management and Budget would maintain a PAYGO ledger that records the average ten-year budgetary effects of all legislation enacted through 2013 that affects mandatory spending or tax legislation relative to the baseline.”
  • The White House added, “There would be exceptions in four areas where current policy differs substantially from current law: (1) Medicare payments to physicians; (2) the estate and gift tax; (3) the AMT; and (4) tax cuts enacted in 2001 and 2003. In those cases, legislation would be entered on the ledger only to the extent that Congress enacted costs that exceed a projection of 2009 policies actually in effect (or for the 2001/2003 tax cuts, policies scheduled for 2010). These exceptions are similar to the treatment of expiring mandatory programs under current PAYGO rules, which do not record costs for simply extending those programs. If there is a PAYGO cost at the end of a particular year because Congress has not succeeded in paying for all the new costs that it has enacted, the President would be required to issue an order sequestering budgetary resources from certain mandatory programs. The bill exempts other mandatory programs from sequestration, primarily those that were exempted in the first PAYGO statute or similar programs enacted since then.”
  • House Majority Leader Steny Hoyer said he would introduce the pay/go legislation as early as next week.

JOINT TAX COMMITTEE RELEASES REVENUE ESTIMATES FOR HEALTH CARE FINANCING:  The Joint Committee on Taxation has released background materials for several of the health care reform financing options suggested by the Senate Finance Committee.  Approximately half of the costs of health care reform are expected to come from revenue raising offsets, with the remainder coming from cost savings within the health care system. 

Notice 2009-56 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. 

H.R.2748: To amend the Internal Revenue Code of 1986 to encourage guaranteed lifetime income payments by excluding from income a portion of such payments.
Sponsor: Rep Pomeroy, Earl [ND] (introduced 6/8/2009)      Cosponsors (1)

H.R.2756: To amend the Internal Revenue Code of 1986 to allow eligible veterans to use qualified veterans mortgage bonds to refinance home loans, and for other purposes.
Sponsor: Rep Davis, Susan A. [CA-53] (introduced 6/8/2009)      Cosponsors (9)

H.R.2762: To amend the Internal Revenue Code of 1986 to provide that the exception from the treatment of publicly traded partnerships as corporations for partnerships with passive-type income shall not apply to partnerships directly or indirectly deriving income from providing investment adviser and related asset management services.
Sponsor: Rep Welch, Peter [VT] (introduced 6/8/2009)      Cosponsors (None)

S.1203: A bill to amend the Internal Revenue Code of 1986 to extend the research credit through 2010 and to increase and make permanent the alternative simplified research credit, and for other purposes.
Sponsor: Sen Baucus, Max [MT] (introduced 6/8/2009)      Cosponsors (9)

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.

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