Daily Tax Update - July 20, 2009

ADMINISTRATION DEFENDS HEALTH CARE BILL COSTS:  Despite growing criticism of the President’s insistence that Congress pass a bill by the August recess and the bill’s cost, the Administration continues its push for passage. Today, President Obama said, “The need for reform is urgent and it is indisputable...This isn't about me. This isn't about politics. This is about a health care system that is breaking America's families...We can't afford the politics of delay and defeat when it comes to health care–not this time, not now.”

  • Yesterday, Director of the Office and Management and Budget Peter Orszag discussed the President’s desired timeline for Congressional passage and defended its cost. Regarding the looming timeline, Orszag said, “We want to get this done by August and we think we can. There are those that are advocating delay just as a desperation move to try and kill this. The typical Washington bureaucratic game of if you don't have a better alternative just delay in hopes that kills something is partly what's playing out here.” Regarding the cost, Orszag said, “[T]he President has said that the bill has to be deficit neutral. If you actually look at the CBO score that came out on Friday night–and again, take off the table just maintaining current payment rates for physicians under Medicare–that bill is deficit neutral.”
  • Yesterday, House Ways and Means Committee Chairman Charlie Rangel criticized the CBO for its delayed assessment that the health care reform bill would increase the federal deficit. Rangel said, “I’m surprised the Congressional Budget Office had these views and didn’t share them with the Ways and Means Committee before we finished our work.” Rangel said that he thought the House could pass a bill before its August recess on July 31st.  Rangel added, “Sure, we wish we had more time. We have a deadline, we will meet it.” The Senate is scheduled to recess on August 7th.
  • On Friday, 22 Democratic House members sent House Speaker Nancy Pelosi a letter expressing strong objections to the surtax provision in the House bill. They argued that the surtax provision would hurt small business owners. When asked about reports that the surtax provision would be off the table because it might make top tax rates rise to 56 or 58 percent, Orszag said, “No. What we have said is this bill has to be deficit neutral. We think there are better ways of obtaining additional revenue, and we have to let this legislative process play out.”
  • In an interview today, House Speaker Nancy Pelosi said she wants to limit the surtax so that it would not affect anyone making under $500,000. Pelosi said she wanted the threshold to be set at $500,000 for individuals and $1 million for families. A spokesman for Pelosi said, “The Speaker has talked about her preference in meetings and in public that there could be more savings which could lead to a change in the surcharge. Discussions are ongoing as the legislative process moves forward.”
  • Today, House Majority Whip Clyburn said, “I don't think we have to have the surcharge at all. A lot of Democrats on my side of the aisle believe that.  But we have said that because we think there is a chance that some funding may need to come far down the road, we could have this trigger in here for a millionaire tax cut, a trigger which we don't think ever will need to be pulled.” Clyburn added, “I think that the president always envisioned having conferences during the August break and coming together with a conference report in September.”
  • Meanwhile, the Senate Finance Committee is still working on the policy issues and financing options for the tax provisions in the Senate’s version.

TAX BILLS INTRODUCED JULY 17TH:
H.R.3248: To amend the Internal Revenue Code of 1986 to exempt motor vehicle donations to certain charities from the limitations on such donations.
Sponsor: Rep Filner, Bob [CA-51] (introduced 7/17/2009)      Cosponsors (2)

H.R.3255: To amend the Internal Revenue Code of 1986 to clarify that qualified personal service corporations may continue to use the cash method of accounting, and for other purposes.
Sponsor: Rep Schwartz, Allyson Y. [PA-13] (introduced 7/17/2009)      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.

STEPTOE & JOHNSON LLP - TAX PRACTICE
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.