Daily Tax Update - June 19, 2009

US AND SWITZERLAND INITIAL TREATY PROTOCOL WITH INCREASED INFORMATION EXCHANGE:  The United States and Switzerland have initialed a treaty protocol that revises the current treaty’s exchange of information provision. The new provision will conform to the OECD Model standard, which generally requires the exchange of information for the administration and enforcement of domestic tax law upon request in all tax matters.

  • The protocol is expected to be signed in the next few months.  Under Swiss law, significant additional obligations to tax treaties are subject to an optional referendum. After the treaty is signed, the Swiss parliament will decide whether the protocol will be subject to this optional referendum.
  • "This Administration is committed to reducing off shore tax evasion to help ensure that all US taxpayers are playing by the same rules," said Treasury Secretary Tim Geithner. “This treaty will increase our ability to enforce our tax laws and will help bring an end to an era of offshore accounts and investments being used for tax evasion.”
  • For additional information, contact Philip R. West - pwest@steptoe.com

INTERNATIONAL PROVISIONS WILL BE USED FOR TAX REFORM, NOT HEALTH CAREAccording to statements yesterday by House Ways and Means Committee Chairman Charles Rangel and National Economic Council Director Lawrence Summers, international reforms will be used in the context of corporate tax reform rather than using them as revenue offsets to help pay for health care reform. President Obama's budget plan includes about $160 billion in various international revenue raisers. 

  • Yesterday, Summers said, “We've believed for a long time that we're going to have to take a comprehensive look at the corporate tax code, what it means for job creation in the United States, what it means for revenue at a time where we have a major deficit, and the president's proposals are one part of what we envision will be a pretty comprehensive look with a focus on all the aspects.” 
  • On the issue of taxation of foreign profits, Summers said, “I think most people who’ve looked at the international tax system have seen how much profits are located in jurisdictions where there’s a very low tax rate but where the economies are small there can’t be that much actual economic activity. That’s got to be something that we view with concern and want to take a serious look at. That’s what the President’s proposals are directed at, but we very much want to work with others to make sure that we have as fair, as pro-American a tax system for corporations as we possibly can and it will be looked at in the context of overall corporate tax reform, I'm sure.”
  • When Summers was asked if he had heard from the business community on the President’s international proposals, he replied, “Oh sure. There are concerns that they’ve expressed. We’ve also heard concerns from many businesses who recognize that some of the things that we want to do in terms of cracking down on tax havens are right and important for people who feel that they’re doing the right thing but they’re put at a competitive disadvantage by others who aren’t. They think it’s important for us to establish rules so you won’t be able to get ahead by relocating profits to tax havens or engaging in other practices of that kind, and we want to be responsive to that concern.”
  • For additional information, contact Mark J. Silverman - msilverman@steptoe.com or Philip R. West - pwest@steptoe.com

TAX BILLS INTRODUCED JUNE 18TH: 
H.R.2940: To amend the Employee Retirement Income Security Act of 1974, the Public Health Service Act, and the Internal Revenue Code of 1986 to require that group and individual health insurance coverage and group health plans permit enrollees direct access to services of obstetrical and gynecological physician services directly and without a referral.
Sponsor: Rep Davis, Susan A. [CA-53] (introduced 6/18/2009)      Cosponsors (1)

H.R.2953: To amend the Internal Revenue Code of 1986 to allow individuals either a credit against income tax or a deduction for expenses paid or incurred by reason of a voluntary or mandatory evacuation.
Sponsor: Rep Paul, Ron [TX-14] (introduced 6/18/2009)      Cosponsors (None)

S.1290: A bill to amend the Internal Revenue Code of 1986 to expand the income tax deduction for dependent care to include part-time students for purposes of calculating earned income under the credit.
Sponsor: Sen Gillibrand, Kirsten E. [NY] (introduced 6/18/2009)      Cosponsors (None)

S.1291: A bill to amend the Internal Revenue Code of 1986 to allow employers a credit against income tax for the cost of teleworking equipment and expenses.
Sponsor: Sen Gillibrand, Kirsten E. [NY] (introduced 6/18/2009)      Cosponsors (None)

S.1297: A bill to amend the Internal Revenue Code of 1986 to encourage guaranteed lifetime income payments from annuities and similar payments of life insurance proceeds at dates later than death by excluding from income a portion of such payments.
Sponsor: Sen Conrad, Kent [ND] (introduced 6/18/2009)      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.

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