Daily Tax Update - July 28, 2009

HOUSE LEADERS TRYING TO STRIKE DEAL WITH BLUE DOGS:  Members of the House Leadership and House Energy and Commerce Committee Chairman Henry Waxman are working to reach an agreement with members of the Democratic Blue Dog Coalition on health care reform. Waxman said that he is working to address the Blue Dog’s concerns and hopes to hold a mark up tomorrow. Waxman added, “We’re attempting to bridge the differences.”

  • Today, Blue Dog member Rep. Jim Cooper said that “our primary concern is that the bill is too expensive.” Cooper added, “We can get a bipartisan bill. They're working on that in the Senate. But unfortunately, the House has been reluctant to take that approach.”
  • Comments made by House Majority Leader Steny Hoyer this week continue to suggest that there is little hope that the House will vote on a bill by the end of the week. Yesterday, Hoyer said, “That clearly will not be possible at this point in time given the commitment I made to publicly post the bill 48 hours before a vote.” However, Hoyer left open the possibility of a weekend vote adding, “We have other days available to us...And, very frankly, if we reach agreement, the committee should act. There is a lot of work that needs to be done, frankly, before we bring a bill to the floor.” Today, Hoyer said, “You understand that if we pass something out of committee this week, we’ve got to spend the month of August putting together the three bills. There’s going to be a lot of work involved, a lot of scoring that needs to be done on that.” Hoyer added, “There’s still obviously other time available to us. Saturday and next week is available. Now whether or not there will be any productive reason to stay for that period of time remains to be seen over the next couple of days.”
  • Meanwhile, the bipartisan group of Senate Finance Committee members continues to try to reach a consensus. Today, Senator John Kerry said there is “probably” a agreement on about 80 percent of the package. Kerry added, “I think we’re really making progress. And, I feel relatively confident that we’re going to be able to come together around some kind of a bill before we leave here that will be the Finance Committee’s idea of how to approach health care. And whether we get through the markup or not I can’t tell you today. But I’m confident we’ll have a concept on which we’ll agree.” Committee Chairman Max Baucus said today that taxing insurance companies that sell the most expensive health care plans is “gaining a lot of currency” as an offset. Kerry added, “There is a consensus building now that it is fair to ask the most expensive plans in America to contribute so that we begin to drive the costs down.”

TREASURY AND IRS ANNOUNCE CONSIDERATION OF GUIDANCE ON “FAILS CHARGES”:  Today, the Treasury Department and Internal Revenue Service (“IRS”) issued Notice 2009-61, announcing that they are considering issuing guidance on the treatment of “Fails Charges” under sections 871, 881, 1441, and 1442. 

  • A “Fails Charge” is an amount paid by a party that has failed to deliver US Treasuries to another party by the date previously agreed to by the parties. Participants in the pay-for-delivery market for US Treasury securities adopted the “Fails Charge” practice to reduce the incidence of delivery failures.
  • Although the Treasury and IRS are considering issuing guidance on the circumstances, if any, in which Fails Charges will be subject to US gross-based taxation, “in light of the complexity of the issues raised by the proper treatment of Fails Charges for US federal tax purposes and the need for guidance,” the IRS will not challenge a taxpayer or withholding agent’s position that Fails Charges paid on or before December 31, 2010 are not subject to US gross-basis taxation, unless contrary guidance is issued that is effective before that date. The Notice does not state explicitly whether a withholding agent is relieved from reporting obligations, and it is unclear whether this omission is intentional.
  • For additional information, contact Philip R. West - pwest@steptoe.com 

TAX BILL INTRODUCED JULY 27th:
H.R. 3354: To amend the Internal Revenue Code of 1986 to repeal the 7.5 percent threshold on the deduction for medical expenses.
Sponsor: Rep Sensenbrenner, F. James, Jr. [WI-5] (introduced 7/27/2009)      Cosponsors (None)

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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