Daily Tax Update - July 30, 2009

IRS ISSUES FINAL REGULATIONS TO SUSPEND PERIOD OF LIMITATIONS FOR CORPORATIONS FACING SUMMONS:  Today, the IRS issued final regulations (T.D. 9455) pursuant to Section 6503(j) that adopt (with one clarifying change) as final Prop. Reg. § 301.6503(j)-1. The final regulations provide that the period of limitations on assessment provided for in Section 6501 is suspended with respect to any corporate return that is the subject of a designated or related summons if a court proceeding to enforce or quash is instituted with respect to that summons. The final regulations are effective July 31, 2009. 

  • The regulations provide that if a court requires compliance with a designated or related summons, the period of suspension of the applicable period of limitations on assessment under section 6501 will consist of the judicial enforcement period plus 120 days. Judicial enforcement period is defined as the period beginning on the day on which a court proceeding is initiated and ending on the day on which there is a final resolution as to the summoned person's response to the summons. If a court does not require any compliance with a designated or related summons, the period of suspension consists of the judicial enforcement period, and the period of limitations on assessment provided in section 6501 shall not expire before the 60th day after the close of the judicial enforcement period.
  • The regulations apply with respect to summonses issued to corporations (or to any other person to whom the corporation has transferred records) that are examined under the coordinated industry case program or any other successor to the coordinated examination program.
  • The clarifying change to Prop. Reg. § 301.6503(j)-1 was that the final regulations provide that compliance with a court occurs when “the IRS determines” that the summoned party has complied with the summons, whereas the proposed regulations provided that compliance occurs when “it is determined” that the summoned party has complied with the summons. 
  • For additional information, contact Mark J. Silverman – msilverman@steptoe.com, Matthew D. Lerner – mlerner@steptoe.com, J. Walker Johnson – wjohnson@steptoe.com, or Arthur L. Baileyabailey@steptoe.com
  • The regulations can be accessed here.

REPORTS OF HOUSE HEALTH CARE DEAL PREMATURE AS MARK UP POSTPONED YESTERDAY–REID “STILL CAUTIOUSLY OPTIMISTIC”:  Although a deal between the House Leadership, Energy and Commerce Committee Chairman Waxman, and the conservative Blue Dog Democrats was announced yesterday, liberal Democrats on the Energy and Commerce Committee forced another delay in yesterday’s scheduled mark up. The liberals on the Committee balked at the deal with the Blue Dog members because of concerns about cost, burdens on small business, and a public insurance option. Rep. Eliot Engel, a Democratic member of the Energy and Commerce Committee, said, “There's angst; there's questions; there's some anger. The question is, have we given up too much for the goals that we need? I don't want to see the insurance companies subsidized by middle-income taxpayers.” The mark up was rescheduled for today and will continue tomorrow.

  • Efforts continue in the Senate Finance Committee to reach a consensus on a bill. Yesterday, Committee Chairman Max Baucus said, “There’s momentum. We’re working.” However, Baucus added, “But you never know. In this process, something might happen that...forces everything to a big halt -- a big stop. I don’t see that. I just know that nothing’s agreed to until everything’s agreed to. We just don’t know yet.”
  • Meanwhile, other Senators continue to voice frustration with the progress in the Finance Committee. Yesterday, Republican member Jon Kyl said, “I’m on the [Finance] Committee and they’re not sharing with me. This is Wednesday, the week before we leave, and if you don’t have something pretty well nailed down by now, you’re not going to have a product available for markup. Language hasn’t even been finally scored because they haven’t put it into legislative language yet.”
  • Yesterday, Senate Health, Education, Labor and Pensions ranking member Michael Enzi said, “They're not even close to having exact language, let alone a CBO score. I would say that in order to do the Finance bill, we had to have agreement that it would not have a public option...You can't say you gotta do it in a week, you gotta do it in a month–You gotta do it in the time it takes.” Enzi added, “I'm not suggesting slowing it down. I'm saying take the right amount of time. I'm saying that it can't be finished in a day or two, it just can't.” Enzi also serves on the Finance Committee.
  • Today, Finance ranking member Grassley and Enzi met with some House Republican leaders regarding the Finance bill.  Enzi said that the Finance bill was a “train wreck” and was “not ready for prime time.” Enzi added, “I don’t know any way how it could be ready today or next week.”
  • Senate Majority Leader Harry Reid said today that he is “still cautiously optimistic that we’ll get something out of Finance before [the end] of this work period.”

TAX BILLS INTRODUCED JULY 30th:
H.R.3379: To amend the Internal Revenue Code of 1986 to impose a tax on transactions in oil futures and options and to deposit the revenues from the tax into the Highway Trust Fund.
Sponsor: Rep DeFazio, Peter A. [OR-4] (introduced 7/29/2009)      Cosponsors (28)

H.R.3382: To amend the Internal Revenue Code of 1986 to encourage individuals to purchase building products and home furnishings, and for other purposes.
Sponsor: Rep Johnson, Henry C. "Hank," Jr. [GA-4] (introduced 7/29/2009)      Cosponsors (7)

H.R.3383: To amend the Internal Revenue Code of 1986 to allow a credit for the purchase of idling reduction systems for diesel-powered on-highway vehicles.
Sponsor: Rep Blumenauer, Earl [OR-3] (introduced 7/29/2009)      Cosponsors (1)

H.R.3390: To amend the Internal Revenue Code of 1986 to waive the 10 percent penalty on distributions from certain retirement plans during periods of high unemployment.
Sponsor: Rep Hoekstra, Peter [MI-2] (introduced 7/29/2009)   

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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