Daily Tax Update - December 4, 2009

SEN. KYL PESSIMISTIC ABOUT ESTATE TAX EXTENSION PASSAGE THIS YEAR: Senate Finance member Jon Kyl said yesterday that he doesn’t think the Senate can pass an estate tax extension before the end of the year. If Congress doesn’t pass a bill this year, the estate tax rate would fall to zero in 2010 and then rise to 55 percent in 2011, with an exemption level of $1 million. Kyl said, “When something is that partisan, it becomes more difficult to accomplish over in the Senate.” Kyl continued, “Given the fact that Blanche Lincoln and I got 51 votes in the budget debate to move forward with a fairer estate tax reform, my hope would be we could pass that over here and that would be what ultimately became law. I think unfortunately, and this is really unfortunate, nothing is going to pass and be signed into law before the end of the year, so you end up with a retroactive change in estate tax law. ... They're so bottled up in this healthcare debate that they won't have time to do anything else." Kyl added, “Ordinarily you can make tax benefits retroactive. I'm not sure I can remember any time we've made tax liability retroactive. This is going to come as a rude shock to some people."

CARRIED INTEREST, OFFSHORE TAX EVASION BILL TO HELP PAY FOR HOUSE TAX EXTENDERS BILL: House Ways and Means Committee Chairman Charles Rangel said yesterday that he would pay for an approximately $30 billion bill extending the 45 tax provisions that are scheduled to expire in 2009 with language designed to halt offshore tax evasion (H.R. 3933), in addition to a provision to tax carried interest as ordinary income. Rangel did not specify which other offsets might be included to help pay for the bill.

MISCELLANEOUS GUIDANCE ISSUED TODAY:
Revenue Ruling 2009-40 provides tables of covered compensation under § 401(l)(5)(E) of the Internal Revenue Code (the “Code”) and the Income Tax Regulations, thereunder, for the 2010 plan year.

Revenue Procedure 2009-55 sets forth for purposes of section 846 of the Internal Revenue Code the loss payment patterns and discount factors for each property and casualty line of business for the 2009 accident year. These factors are to be used by property and casualty insurance companies in discounting unpaid losses.

Revenue Procedure 2009-56 sets forth for purposes of section 832 of the Internal Revenue Code the salvage discount factors for each property and casualty line of business for the 2009 accident year. These factors are to be used by property and casualty insurance companies to discount estimated salvage recoverable.

TAX BILLS INTRODUCED DECEMBER 3rd:
H.R.4189: To amend the Internal Revenue Code of 1986 to accelerate the phasein of the deduction for domestic production activities.
Sponsor: Rep Manzullo, Donald A. [IL-16] (introduced 12/3/2009)      Cosponsors (None)

H.R.4191: To amend the Internal Revenue Code of 1986 to impose a tax on certain securities transactions to fund job creation and deficit reduction.
Sponsor: Rep DeFazio, Peter A. [OR-4] (introduced 12/3/2009)      Cosponsors (25)

H.R.4201: To amend the Internal Revenue Code of 1986 to extend the special rule for contributions of book inventory to public schools.
Sponsor: Rep Cuellar, Henry [TX-28] (introduced 12/3/2009)      Cosponsors (None)

H.R.4208: To amend the Internal Revenue Code of 1986 to increase the limitation on the reduction in fair market value of real property used for farming, or in another trade or business, for purposes of estate taxes.
Sponsor: Rep Perriello, Thomas S.P. [VA-5] (introduced 12/3/2009)      Cosponsors (None)

H.R.4209: To amend the Internal Revenue Code of 1986 to suspend for an additional year the taxable income limit on percentage depletion for oil and natural gas from marginal wells.
Sponsor: Rep Teague, Harry [NM-2] (introduced 12/3/2009)      Cosponsors (1)

H.R.4210: To amend the Internal Revenue Code of 1986 to provide for an energy investment credit for energy storage property connected to the grid, and for other purposes.
Sponsor: Rep Thompson, Mike [CA-1] (introduced 12/3/2009)      Cosponsors (1)

H.R.4211: To amend the Internal Revenue Code of 1986 to treat nonrecourse small business investment company loans from the Small Business Administration as amounts at risk for purposes of determining the deduction for losses.
Sponsor: Rep Thompson, Mike [CA-1] (introduced 12/3/2009)      Cosponsors (1)

S.2826: A bill to amend the Internal Revenue Code of 1986 to extend the renewable production credit for wind and open-loop biomass facilities, and for other purposes.
Sponsor: Sen Grassley, Chuck [IA] (introduced 12/3/2009)      Cosponsors (None)

S.2827: A bill to amend the Internal Revenue Code of 1986 to expand the military housing allowance exclusion for purposes of determining area gross income in determining whether a residential rental property for purposes of the exempt facility bond rules.
Sponsor: Sen Schumer, Charles E. [NY] (introduced 12/3/2009

S.2829: A bill to amend the Internal Revenue Code of 1986 to allow the cost of labor for building envelope improvements to be included for purposes of the nonbusiness energy property tax credit.
Sponsor: Sen Wyden, Ron [OR] (introduced 12/3/2009)      Cosponsors (2)

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
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