Daily Tax Update - July 27, 2009

PROPOSED CIRCULAR 230 REGULATIONS ON CONTINGENT FEES:  Today, Treasury and the IRS issued proposed regulations modifying the Circular 230 rules on contingent fees.

  • In 2007, Treasury and the IRS issued final regulations modifying rules governing standards of practice before the IRS, including the rules that generally preclude a practitioner from charging a contingent fee for services rendered in connection with any matter before the IRS. The regulations expressly provide that a practitioner may charge a contingent fee for services rendered in connection with (1) the IRS examination of, or challenge to, an original return and certain amended returns, (2) a claim for refund or credit of interest and penalties assessed by the IRS, and (3) a judicial proceeding arising under the Internal Revenue Code.
  • In 2008, Treasury and the IRS published Notice 2008-43 providing interim guidance and information regarding the contingent fee rules. The Notice clarified that a written notice of examination from the IRS is not a prerequisite to a practitioner charging a contingent fee for services rendered in connection with an IRS examination of, or challenge to, an amended return. The guidance also clarified that the contingent fee prohibition does not apply to contingent fees with respect to whistleblower claims under section 7623.
  • The proposed regulations modify the contingent fee rules consistent with the interim guidance provided in Notice 2008-43. The proposed regulations also modify the definition of "contingent fees” to clarify that a contingent fee depends on the specific tax results attained, not non-tax contingencies (e.g., closing of a transaction). The definition is modified by adding the word "tax" in the following sentence: "A contingent fee includes a fee that is based on a percentage of the refund reported on a return, ...or that otherwise depends on the specific tax results attained.”
  • For additional information, contact Mark J. Silvermanmsilverman@steptoe.com, Arthur L. Baileyabailey@steptoe.com, or Alexis A. MacIvoramacivor@steptoe.com 

HOPE DIMS FOR PRE-RECESS HOUSE PASSAGE OF HEALTH CARE REFORM:  Despite optimistic comments by House Speaker Nancy Pelosi yesterday that the House could still pass a health care reform bill before the August recess, the House may have to postpone a vote until after it returns in September. Yesterday, Pelosi said, “When I take this bill to the floor, it will win. This will happen.” 

  • On Friday, House Majority Leader Steny Hoyer said that the probability “is very small” that the House would pass a bill before the end of this week. Hoyer added, “The speaker and I both had the hope that we would be able to pass the health care bill by the time we left here on the 31st of July. At this point in time, that may not be possible.” The House is scheduled to recess for a month beginning July 31 but Hoyer said that the House could continue working behind the scenes. Hoyer continued, “We’re going to keep working until the bill is done; that does not necessarily mean we’re going to work in session.” 
  • Administration adviser David Axelrod said yesterday, “Now, we're at the final 20 percent and we're trying to work through those details.” Axelrod added, "We're less interested in hard deadlines than in moving the process forward. The deadlines have had a disciplining effect...What we don't want is for the process to bog down here. We want to keep moving forward, and I believe we will.” 
  • Meanwhile, Rep. Jim Cooper, a member of the Democratic Blue Dog coalition, said, “We have a long way to go. David Axelrod is right; we have agreement on 70 or 80 percent of the legislation, but it is important we get the other details right, too.” 

SENATE CONFIRMS WILKINS AS IRS CHIEF COUNSEL:  On Friday, the Senate confirmed by unanimous consent William Wilkins to be the IRS's next chief counsel and an assistant general counsel in the Treasury Department.

MISCELLANEOUS GUIDANCE ISSUED TODAY:
Revenue Ruling 2009-23 states that the Forest Health Protection Program (FHPP) is substantially similar to the type of programs described in §126(a)(1) through (8) of the Internal Revenue Code within the meaning of § 126(a)(9).  Consequently, all or a portion of cost-share payments received under the FHPP is eligible for exclusion from gross income to the extent permitted by Section 126. 

TAX BILL INTRODUCED JULY 24th:
H.R. 3333 : To amend the Internal Revenue Code of 1986 to repeal the reduction in the deductible portion of expenses for business meals and entertainment.
Sponsor: Rep Abercrombie, Neil [HI-1] (introduced 7/24/2009)      Cosponsors (3)

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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