Daily Tax Update - January 20, 2010

REPUBLICAN WIN IN MASSACHUSETTS FORCES DEMOCRATS TO RE-EVALUATE HEALTH CARE STRATEGY: With the dramatic election victory by Republican Scott Brown for the US Senate seat in Massachusetts which has changed the political and legislative landscape in the Senate, Democrats have been forced to consider several alternatives to pass a health care reform bill. Brown has vowed to vote against the current health care bill. Brown’s victory also creates significant ramifications on a wide range of the President’s legislative agenda items since the Democrats needed 60 votes for a filibuster-proof majority and the Republicans will have 41 votes once Brown is seated. Some reports indicated Brown’s victory could be officially certified as early as today while others noted it could take as long as two weeks for the Massachusetts Secretary of State to certify the election results. Senate Majority Leader Harry Reid said in a statement that Brown would be seated "as soon as the proper paperwork has been received." 

  • Democratic Steering Committee Chairwoman Debbie Stabenow said, “We are very committed to health care reform. It’s a question of how we do it. We have to look at the practical reality with the Republicans being able to block whatever happens with 41 votes.” Stabenow added, “We’re looking at various options right now. Obviously we’re going to continue to talk with the House and see what they can do and the White House.”
  • Senate Minority Leader Mitch McConnell called Brown’s victory “in many ways a national referendum,” particularly on health care reform. McConnell added, “I think the majority has gotten the message here — no more gamesmanship, no more lack of transparency.”
  • One option for passage of the health care bill would be for the House to pass the Senate-passed version and then send it straight to the President’s desk. Another option would be to consider the bill under reconciliation protection that would allow Democrats to modify parts of the health care reform bill with only a 51-vote majority. Senate Majority Whip Dick Durbin said, “We could go to something called 'reconciliation', which is in the weeds procedurally, but would allow us to modify that health care bill by a different process that doesn't require 60 votes, only a majority. So that is one possibility there."
  • Sen. Jim Webb said that it would "only be fair and prudent that we suspend further votes on health care legislation until Brown is seated." 
  • Rep. Anthony Weiner concurred, "It wouldn't be the worst thing in the world to take a step back and say we're going to pivot, do a jobs thing, and try to include some health care things as a part of that. If we were struggling and making the bill worse with a 60-vote Senate majority, I don't see how we make it better with 59." 
  • Senate Majority Leader Harry Reid said that although Brown's victory "changes the political math," he hopes Brown will join Democrats in "strengthening our economy, creating good-paying jobs and ensuring all Americans can access affordable health care." Reid added, “Regardless of the size of their minority caucus, Senate Republicans have always had an obligation to join us in governing our nation through these difficult times. Today's election doesn't change that. In fact it is now more important than before for Republicans to work with us rather than against us if we are to find common ground that improves Americans' lives.”
  • In other developments, President Obama will deliver his first State of the Union Address on January 27. On February 1, the President will submit his new budget for Fiscal Year 2011. When asked about the President’s legislative priorities for 2010, White House Press Secretary Robert Gibbs said, “His [President Obama’s] primary focus will be on creating jobs.”

IRS NAMES DANILACK DEPUTY COMMISSIONER FOR INTERNATIONAL TAX MATTERS: Today, the IRS announced the selection of Michael Danilack as Deputy Commissioner (International) for the Large and Mid-Size Business Division. According to the IRS, “Danilack will oversee a wide range of issues relating to international tax matters. These include ensuring consistent tax treatment of US taxpayers concerning international issues, providing timely and effective implementation of tax treaty and tax information exchange and advising the Large and Mid-Size Business Commissioner on issues involving international tax administration.”

  • Steven Miller, IRS Deputy Commissioner for Services and Enforcement said, “Michael brings 25 years of experience and broad expertise inside and outside the government to this critical position. In addition to his work in the private sector, Michael has also previously served in one of the key IRS legal positions supporting international tax law. As recent months have illustrated, globalization continues to increase the importance of international tax issues, and Michael is well positioned to help our efforts.”

COBRA SUBSIDY ELIGIBILITY PERIOD EXTENDED THROUGH FEBRUARY: The IRS announced today that workers who lose their jobs during January and February may qualify for a 65-percent subsidy on their COBRA health insurance premiums, and these newly-eligible individuals, along with those already receiving the subsidy, can now receive it for up to 15 months. According to the Internal Revenue Service, “The COBRA subsidy eligibility period was originally scheduled to expire at the end of 2009, and eligible individuals only qualified for the subsidy for nine months. But the Department of Defense Appropriations Act, 2010, enacted on Dec. 19, extended the eligibility period and the maximum duration of COBRA premium assistance. As a result, workers who are involuntarily terminated from employment between Sept. 1, 2008, and Feb. 28, 2010, may be eligible for a 65-percent subsidy of their COBRA premiums for a period of up to 15 months. Involuntarily terminated employees who meet certain other requirements, and certain family members of those individuals, are referred to as “assistance-eligible individuals.”

  • Additional information can be accessed here

MISCELLANEOUS GUIDANCE RELEASED TODAY:
Revenue Ruling 2010-06 provides various prescribed rates for federal income tax purposes including the applicable federal interest rates, the adjusted applicable federal interest rates, the adjusted federal long-term rate, the adjusted federal long-term tax-exempt rate. These rates are determined as prescribed by § 1274. The rates are published monthly for purposes of sections 42, 382, 412, 1288, 1274, 7520, 7872, and various other sections of the Internal Revenue Code.

Notice 2010-15 provides guidance in the form of questions and answers with respect to certain provisions of the Heroes Earnings Assistance and Relief Tax Act of 2008 (“HEART Act”). The notice also requests comments regarding any additional issues relating to the sections of the HEART Act that are addressed in the notice.

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.