Daily Tax Update - July 14, 2009

HEALTH CARE REFORM FINANCING OFFSETS RELEASED:  Today, House Democrats released a 1,018-page health care reform bill (H.R. 3200). The revenue provisions in the bill are scheduled to be marked up in the Ways and Means Committee on July 16th.  

  • The bill's proposed graduated surtax would place a 1 percent surtax on joint filers making between $350,000 and $500,000, a 1.5 percent rate on those making between $500,000 and $1 million, and 5.4 percent on those making above $1 million. The provision is expected to raise $544 billion over 10 years. A surtax increase would be triggered in 2013 if the Office of Management and Budget does not see savings related to the bill's proposed reforms materialize. The surtax's first two rates would rise to 2 percent and 3 percent respectively. If the government determines there has been at least $150 billion in savings the bill would drop the lower of the two surtax triggers while a savings of at least $175 billion would cancel the second trigger level as well.
  • The bill would delay the worldwide interest allocation until December 31, 2019 and is expected to raise $26.1 billion over 10 years. The bill would also place limits on treaty benefits for certain deductible payments ($7.5 billion over 10 years) and codify the economic substance doctrine ($3.6 billion over 10 years). The measure would increase the penalty for the nondisclosure of noneconomic substance transactions from 20 percent to 40 percent.
  • Yesterday, House Speaker Nancy Pelosi expressed optimism that the bill would pass before the August recess. Pelosi said, “We have to roll out this program this week. We will be on schedule to pass this bill before we leave for the August recess.” When asked about the short timeframe before the Congressional recess, Pelosi responded, “Welcome to the legislative process. In case you haven't noticed, this is how it works.” 
  • A summary of the revenue provisions can be here.  
  • Additional summaries of the bill can be accessed here.   

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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