Daily Tax Update - June 15, 2009

LAWMAKERS EXPRESS CONCERN TO IRS OVER PENALTIES ON SMALL BUSINESSES:  Several members of the Senate Finance and House Ways and Means Committees sent a letter Friday to IRS Commissioner Douglas Shulman, requesting assistance while Congress works to address certain penalties assessed on small businesses. The lawmakers are seeking to help small businesses that invested in listed tax shelter transactions that generated modest tax benefits, but resulted in tax penalties significantly larger than the tax benefits received.   

  • In the letter, Senate Finance Chairman Max Baucus (D-Mont.), Ranking Member Chuck Grassley (R-Iowa), along with Ways and Means Oversight Subcommittee Chairman John Lewis (D-GA) and Ranking Member Charles Boustany (R-LA) state that “such disproportionate consequences were unexpected at the time the penalty was enacted, and they expect to introduce legislation that would result in penalty amounts in better proportion to the tax benefits. While the penalty has helped IRS end many abusive deals, many of the shelters being examined by the IRS involve significantly smaller dollar amounts, and current penalty levels may be excessive in some circumstances.” 
  • Baucus said, “Congress needs to do its part to ensure the tax code treats these businesses fairly. We’re asking the IRS to temporarily suspend the collection of certain penalties while we work on legislation to bring the assessed tax penalties in line with the received tax benefits. This is an issue of fairness, and making sure businesses are not forced to pay undue penalties, particularly in a struggling economy. I don’t condone investments in tax shelters, but I also want to make sure our small businesses survive and thrive. It’s important we get this done as soon as possible and I urge and expect the IRS to comply with our request.”    
  • Grassley said, “When I advanced the legislation to shut down tax shelters, I did not intend to bankrupt small businesses that had no ill intent. I was focused on the big corporations that were actively seeking to hide their participation in tax shelters. The penalty should be commensurate with the transgression.”

TAX BILL INTRODUCED JUNE 12TH:
H.R.2851:  To amend the Internal Revenue Code of 1986 to exclude certain gains on single-family residential rental property from gross income.
Sponsor: Rep Brady, Kevin [TX-8] (introduced 6/12/2009)      Cosponsors (2)

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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