Daily Tax Update - July 15, 2009

IRS UPDATES LISTED TRANSACTION LIST:  On June 15, the IRS issued Notice 2009-59 to provide a complete list of listed transactions for purposes of  Treas. Reg. §1.6011-4(b)(2) and §§ 6111, 6112, 6662A, 6707, 6707A, and 6708 of the Internal Revenue Code. Notice 2009-59 restates the list of listed transactions in Notice 2004-67 and updates the list by adding transactions identified by the IRS as listed transactions in notices and other guidance released after September 24, 2004. 

  • Notice 2009-59 also lists transactions that were previously identified by the IRS as transactions that will no longer be considered listed transactions for purposes of Treas. Reg. §1.6011-4(b)(2) and §§ 6111 and 6112. These transactions include: (1) transactions described in Notice 98-5 (withdrawn by Notice 2004-19) in which the reasonably expected economic profit is insubstantial in comparison to the value of expected foreign tax credits; and (2) transactions described in Notice 2002-70 (removed as a listed transaction by Notice 2004-65) involving reinsurance arrangements between a taxpayer and the taxpayer's own reinsurance company that is subject to little or no federal income tax.

IRS UPDATES TRANSACTIONS OF INTEREST LIST:  On June 15, the IRS issued Notice 2009-55 to provide a list of transactions that it previously identified as transactions of interest for purposes of Treas. Reg. §1.6011-4(b)(2) and §§ 6111, 6112, 6662A, 6707, 6707A, and 6708.

  • Taxpayers entering into transactions of interest on or after November 2, 2006 must disclose their participation in the transaction. Material advisors who make a tax statement with respect to such transactions on or after November 2, 2006 may have disclosure and list maintenance requirements.
  • The current list of transactions of interest includes: (1) charitable contributions of successor interests in real property or an entity holding real property (Notice 2007-72); (2) transactions involving "toggling" grantor trusts (Notice 2007-73); (3) sales of charitable remainder trust interests following a contribution of appreciated property and their reinvestment by the trust (Notice 2008-99); and (4) holding CFC interests through a partnership to exclude subpart F income (Notice 2009-7).
  • For additional information, contact Mark J. Silverman - msilverman@steptoe.com or Matthew D. Lerner - mlerner@steptoe.com.
  • The notices can be accessed here: Notice 2009-55 and Notice 2009-59

WAYS AND MEANS TO MARK UP HEALTH CARE TAX PROVISIONS TOMORROW AS FINANCE CONTINUES WORK ON OFFSETS:  Preliminary cost estimates from the Congressional Budget Office have scored the House health care reform bill at just over $1 trillion. The House Ways and Means Committee is slated to mark up the bill’s tax provisions tomorrow and the House is expected to pass the bill before adjourning July 31 for its August recess. 

  • Committee Chairman Charles Rangel said yesterday that the President “will have a bill in September, and you need two Houses” and suggested that Congress could stay in session in August if the bill is not finished.  Rangel said, “I’m not saying we wouldn’t stay.” When asked if President Obama supports the House bill, Rangel said, “He has not really impeded any decision we have made along the way.” Rangel added, “There is not a question that the President is prepared to use whatever political capital he has to make this work...The President wants whatever we get out there. He wants a bill.”
  • Today, President Obama reiterated his call for Congress to pass health care legislation before the August recess. The President said, “We’re going to be continually talking about this for the next two to three weeks, until we’ve got a bill out of the Senate and we’ve got a bill out of the House,” adding that afterward everyone could “get a few weeks rest.”
  • A section by section analysis of the entire House bill can be accessed here
  • In addition to the surtax on wealthy taxpayers, worldwide interest allocation delay, economic substance codification, and limitation on treaty benefits for certain deductible payments, the House bill includes three other tax-related health care provisions: (1) noncompliance tax on individuals; (2) noncompliance tax on employers; and (3) small business tax credit.
  • Meanwhile, the Senate Finance Committee is in the process of drafting a bill with its own package of revenue offsets. Yesterday, Chairman Max Baucus said, “We went through a list of at least 10 items, reached resolution, I'd say, on close to half of them. We have some ideas on how to resolve the others.” When asked whether the items were revenue-related, he answered, “They were frankly not. They were more options on the other side of the ledger, from the savings side of the ledger.” The Committee could mark up its bill next week. Baucus added, “I think the naysayers, the Dr. Nos of the world, would like a delay so they can work their mischief, you know, over August recess and later. They don't have constructive alternatives; they just want to kill it, stop it, so I think we have to move expeditiously, but work very diligently so we have the very best possible solution we can.” When asked about the surtax provision in the House bill, Baucus said, “The House is going to do what it thinks is best, and we in the Senate are going to enact a version that we think is best.”

JOINT TAX COMMITTEE PROVIDES DESCRIPTION AND REVENUE ESTIMATES OF HOUSE HEALTH CARE BILL: The Joint Committee on Taxation has released a description of the revenue raisers in the House health care bill (H.R. 3200) as well as the revenue estimates. 

  • The documents can be accessed here and here.  

H.R.3205: To amend the Internal Revenue Code of 1986 to deny any deduction for advertising health insurance.
Sponsor: Rep Lipinski, Daniel [IL-3] (introduced 7/14/2009)      Cosponsors (None)
Committees: House Ways and Means

H.R.3207: To amend the Internal Revenue Code of 1986 to exclude from gross income gain on the sale of certain residential leased-fee interests to holders of the leasehold rights.
Sponsor: Rep Abercrombie, Neil [HI-1] (introduced 7/14/2009)      Cosponsors (1)

H.R.3213: To amend the Internal Revenue Code of 1986 to expand and make permanent the standard deduction for real property taxes.
Sponsor: Rep Paul, Ron [TX-14] (introduced 7/14/2009)      Cosponsors (None) 

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 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.