Daily Tax Update - July 31, 2009

THE DAILY TAX UPDATE WILL BE PUBLISHED ON A PERIODIC BASIS UNTIL CONGRESS RETURNS FROM ITS AUGUST RECESS ON SEPTEMBER 8TH.

IRS issues final services regulations:  Today, the IRS issued final transfer pricing regulations under section 482 (T.D. 9456) that provide guidance regarding the treatment of controlled services transactions and the allocation of income from intangible property. These final regulations reflect comments on the temporary and proposed regulations issued by the IRS on August 4, 2006.  

  • The regulations state that they clarify and improve the 2006 temporary regulations without fundamentally altering the policies, format, or substance of those temporary regulations. They apply to taxable years beginning after July 31, 2009. Taxpayers may elect to apply the final regulations to any taxable year beginning after September 10, 2003. Such an election will be effective for the year of the election and all subsequent taxable years.   
  • We expect to circulate comments and analysis on the regulations in due course. 
  • For additional information, contact Philip R. Westpwest@steptoe.com, Michael C. Durstmdurst@steptoe.com, or Stanley Smilack – ssmilack@steptoe.com  

NO FINANCE MARKUP BEFORE RECESS -- HOUSE ENERGY AND COMMERCE COMMITTEE  REACHES DEAL WITH LIBERALS AND CONSERVATIVES:  As the House prepares to adjourn this weekend for its five-week recess, Senate Finance Chairman Max Baucus said last night that there would be no Finance markup next week. The Senate is scheduled to adjourn for its recess on August 7th. Baucus said of yesterday’s session, “It was really a great meeting—a very productive meeting. We are committed to finding a bipartisan solution as expeditiously as possible. We talked out the agenda, the issues...We are committed to a full session next week—every day of next week.” Baucus added: “It’s clear there will not be a markup next week. That’s clear. But nevertheless, we are as committed, if not more committed, to find a bipartisan agreement.”

  • Finance member Jeff Bingaman said that yesterday’s meeting resulted in “a general agreement that we want to do all we can next week to get some of the difficult issues resolved. That’s what everyone’s committed to.” Bingaman said that he did not expect the Committee to have a framework ready by the end of next week. Bingaman added, “I doubt we’ll try to do that. There was no discussion of it.”
  • Another Finance member, Sen. Charles Schumer added, “It's important to get the bill signed into law by the end of the year—that's the only deadline that matters.”
  • Later today, the House Energy and Commerce is expected to pass its version of a health care reform bill after an agreement was struck between liberals and conservatives on the Committee. The agreement will add a package of amendments from liberals that includes an increase in subsidies for the poor and more savings from drug companies to the agreement worked out earlier this week by the Blue Dogs.
  • House Majority Whip James Clyburn said yesterday that it’s not clear what provisions will survive when the three House Committee bills are merged. Clyburn said, “That will get melded with Ways and Means and Education and Labor, so I’m not going to get worked up on what comes out of any one committee.” While House Ways and Means Chairman Charles Rangel added, “I am more concerned about the Rules Committee than I am with Energy and Commerce.”

IRS RELEASES VOLUNTARY DISCLOSURE FORM:  On July 29, the IRS released an optional offshore voluntary disclosure form designed to streamline the process for applying to the temporary reduced-penalty program for voluntary disclosures of offshore accounts or assets. The form asks taxpayers to identify themselves, their representatives, and the source of their undisclosed assets. It seeks estimates of their undisclosed income, information about their financial institutions, and information on communications with those institutions, among other things.

TAX BILLS INTRODUCED JULY 30th:
H.R.3399: To amend the Internal Revenue Code of 1986 to permit the consolidation of life insurance companies with other companies.
Sponsor: Rep Larson, John B. [CT-1] (introduced 7/30/2009)      Cosponsors (1)

H.R.3406: To amend the Internal Revenue Code of 1986 to exclude from gross income amounts reimbursed by an individual's employer for certain dietary supplements and meal replacement products.
Sponsor: Rep Blumenauer, Earl [OR-3] (introduced 7/30/2009)      Cosponsors (1)

H.R.3408: To amend the Internal Revenue Code of 1986 to modify the rules relating to the treatment of individuals as independent contractors or employees, and for other purposes.
Sponsor: Rep McDermott, Jim [WA-7] (introduced 7/30/2009)      Cosponsors (2)

H.R.3409: To amend the Internal Revenue Code of 1986 to allow an additional credit against income tax for the adoption of an older child.
Sponsor: Rep Bean, Melissa L. [IL-8] (introduced 7/30/2009)      Cosponsors (12)

H.R.3424: To amend the Internal Revenue Code of 1986 to disallow the deduction for excess non-taxed reinsurance premiums with respect to United States risks paid to affiliates.
Sponsor: Rep Neal, Richard E. [MA-2] (introduced 7/30/2009)      Cosponsors (None)

H.R.3429: To amend the Internal Revenue Code of 1986 to allow individuals to defer recognition of reinvested capital gains distributions from regulated investment companies.
Sponsor: Rep Ryan, Paul [WI-1] (introduced 7/30/2009)      Cosponsors (2)

H.R.3432: To amend the Internal Revenue Code of 1986 to allow long-distance rural commuters a deduction during periods when the local price of gasoline exceeds $3 per gallon.
Sponsor: Rep Space, Zachary T. [OH-18] (introduced 7/30/2009)      Cosponsors (1)

H.R.3434: To amend the Internal Revenue Code of 1986 to modify the credit for expenses for household and dependent care services necessary for gainful employment.
Sponsor: Rep Donnelly, Joe [IN-2] (introduced 7/30/2009)      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.

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.