Daily Tax Update - July 10, 2009

HOUSE DELAYS HEALTH CARE MARKUP -- TAX-WRITERS EYE SURTAX ON HIGH INCOME EARNERS:  House and Senate tax-writers continue to search for revenue raisers to pay for a health care reform bill. One option that has garnered some support is a surtax between 3.5 percent and 4.5 percent on wealthy individuals with more than $200,000 in adjusted gross income ($250,000 in the case of joint returns). Among the other options that appear to have support include an additional tax on dividend earnings, new taxes on sugary beverages and alcohol, and limiting the tax deduction for advertising by certain manufacturers of drugs, devices, or medical supplies. 

  • Yesterday, Senate Budget Chairman and Finance Committee member Kent Conrad said, “We've got to go back to the drawing board on this. There's a $320 billion hole. It doesn't have to be filled by revenues.” Senate Finance Committee member Olympia Snowe added, “Anytime you introduce taxes into the funding mechanism, it raises the possibility of opposition.”
  • Although House Ways and Means Committee Chairman Charles Rangel was expected to release the revenue raisers for health care reform today, due to objections from the fiscally conservative Blue Dog Democrats, the release of the pay-fors and Monday’s markup have been postponed while negotiations continue with the Blue Dogs over cost concerns. Regarding the surtax provision, Blue Dog member Rep. Mike Ross said, “We haven’t taken a position on any of the revenue raisers. We want to see more savings out of the current system.”

TREASURY RELEASES RULES FOR RENEWABLE ENERGY GRANTS IN LIEU OF TAXES:  Yesterday, the Treasury Department released guidance with respect to payments for specified energy property in lieu of tax credits otherwise available. The guidance describes property that may qualify for the grants provided for under Section 1603 of the American Recovery and Reinvestment Act of 2009 (Pub. L. No. 111-5).

  • The grants will equal 10% or 30% of the basis of the energy property, depending upon the specific nature of the energy property placed in service. 
  • A copy of the terms and conditions for applications and a sample application were also published.
  • Applications are not currently being accepted. Treasury will publish a notice specifying when applications will be accepted.
  • The grant application period will end September 30, 2011.
  • Additional information can be accessed here

MISCELLANEOUS GUIDANCE ISSUED TODAY:
Notice 2009-58 sets forth a process that allows manufacturers to certify to the Internal Revenue Service that a particular vehicle meets the requirements of § 30 of the Internal Revenue Code. Taxpayers purchasing such vehicles can rely on the domestic manufacturer's (or, in the case of a foreign manufacturer, its domestic distributor's) certification that both a particular make, model, and model year of vehicle qualifies as a plug-in electric vehicle under § 30, and the amount of the credit allowable with respect to the vehicle. Click here for additional information.

TAX BILLS INTRODUCED JULY 9TH:
H.R.3153: To amend the Internal Revenue Code of 1986 to impose a tax on over-the-counter derivatives transactions, and for other purposes.
Sponsor: Rep Larson, John B. [CT-1] (introduced 7/9/2009) Cosponsors (None)

H.R.3156: To amend the Internal Revenue Code of 1986 to provide a credit against tax for expenses paid or incurred in non-clinical research for neglected diseases.
Sponsor: Rep Payne, Donald M. [NJ-10] (introduced 7/9/2009) Cosponsors (3)

H.R.3164: To amend the Internal Revenue Code of 1986 to increase, make permanent, and index for inflation the deduction for certain expenses of elementary and secondary school teachers and to modify the definition of eligible educator for purposes of such deduction to include preschool educators.
Sponsor: Rep Titus, Dina [NV-3] (introduced 7/9/2009) Cosponsors (7)

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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.