Daily Tax Update - December 21, 2009

THE DAILY TAX UPDATE WILL BE PUBLISHED ON A PERIODIC BASIS UNTIL CONGRESS RECONVENES ON JANUARY 19TH.

SENATE CLEARS KEY HEALTH CARE REFORM BILL PROCEDURAL HURDLE: All 60 members of the Democratic caucus have now agreed to advance an $871 billion health care reform bill after concessions were made to secure Democratic support over the weekend. Early this morning, the Senate voted 60 to 40 to end debate on the manager’s amendment. The Senate is expected to pass the final bill on Christmas Eve without support from any Republicans.

  • The Senate bill and the House-passed bill are vastly different and must be reconciled when Congress returns in January, after which a vote must be held on the final version. The Senate bill does not contain a government-run insurance option provision like the House bill or a surtax on high income individuals. The Senate bill includes an excise tax on high-cost “Cadillac” insurance plans.
  • Democratic Senators warned that any significant changes in the conference committee negotiations could jeopardize its final passage. Sen. Kent Conrad said, “It is very clear that the bill, the final bill, to pass in the United States Senate is going to ... have to be very close to the bill that has been negotiated here. Otherwise you will not get 60 votes in the United States Senate."  
  • Sen. James Webb said, “Significant deviations from the core principles I insisted on in this compromise must remain, or I will withhold my support.”
  • Final support from a key Democratic Senator also is dependent on what changes are made to the bill. Sen. Ben Nelson said, “If there are material changes in that conference report different from this bill that adversely affect the agreement, I reserve the right to vote against the next cloture vote. Let me repeat it, I reserve the right to vote against the next cloture vote, if there are material changes to this agreement in the conference report. And I will vote against it if that is the case." 

CONGRESS EXTENDS COBRA SUBSIDY FOR TWO MONTHS IN DOD APPROPRIATIONS BILL: The Department of Defense appropriations bill passed on Saturday by Congress extends the 65% COBRA subsidy program created by the American Recovery and Reinvestment Act for persons whose employer- provided coverage was involuntarily terminated, for another two months, until February 28, 2010. In addition, the law retroactively extends the subsidy period from 9 months to 15 months, affecting persons who are already receiving coverage and even those whose coverage subsidized coverage has expired. The law also requires a new round of notices with the extension. Guidance on the notices is expected from the Labor Department.

TAX BILLS INTRODUCED DECEMBER 18th:
S.2916: A bill to provide that Internal Revenue Service Notice 2010-2 shall have no force and effect and to amend the Internal Revenue Code of 1986 to restrict the authority of the Secretary of the Treasury to prescribe regulations under section 382 of such Code.
Sponsor: Sen Bunning, Jim [KY] (introduced 12/18/2009)      Cosponsors (None)

S.2917: A bill to amend the Internal Revenue Code of 1986 to modify the penalty for failure to disclose certain reportable transactions and the penalty for submitting a bad check to the Internal Revenue Service, to modify certain rules relating to Federal vendors, and for other purposes.
Sponsor: Sen Baucus, Max [MT] (introduced 12/18/2009)      Cosponsors (9)

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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