Daily Tax Update - January 28, 2010

PRESIDENT PROMOTES JOB CREATION, MIDDLE CLASS TAX RELIEF: In last night's State of the Union address, President Obama focused heavily on job creation. The President said that the Senate should pass a jobs bill similar to the one passed by the House. The President said, “As the first order of business this year, I urge the Senate to do the same, and I know they will. They will. People are out of work. They're hurting. They need our help. And I want a jobs bill on my desk without delay.”

  • Obama called for $30 billion from bailout funds repaid by Wall Street to be directed toward helping community banks lend to small businesses. The President also proposed a new tax credit for small businesses that hire new workers and a tax incentive for businesses that invest in new plants and equipment. The President also called for the elimination of all capital gains taxes for small business investment. The President said, “So tonight, I'm proposing that we take $30 billion of the money Wall Street banks have repaid and use it to help community banks give small businesses the credit they need to stay afloat. I'm also proposing a new small business tax credit–one that will go to over one million small businesses who hire new workers or raise wages. While we're at it, let's also eliminate all capital gains taxes on small business investment, and provide a tax incentive for all large businesses and all small businesses to invest in new plants and equipment.” The President added, “And to encourage these and other businesses to stay within our borders, it's time to finally slash the tax breaks for companies that ship our jobs overseas and give those tax breaks to companies that create jobs in the United States of America.”
  • On the issue of health care, Obama said that he would not "walk away" from the issue and urged Congress to take "another look" at the bills passed by the House and Senate. Obama said, “Here's what I ask Congress, though: Don't walk away from reform. Not now. Not when we are so close. Let us find a way to come together and finish the job for the American people. Let's get it done. Let's get it done. “Today, House Speaker Nancy Pelosi reiterated her support for completing a bill.  Pelosi said, “We’ll go through the gate.  If the gate is closed, we’ll go over the fence. If the fence is too high, we’ll pole vault in. If that doesn’t work, we’ll parachute in. But we’re going to get health care reform passed for the American people.” Senate Majority Leader Reid said, "We’re going to move forward. We’re going to do health care reform this year. The question is procedurally how do we do it.”
  • The President also said that he would establish a bi-partisan commission on the budget and that he supported pay-as-you-go. The President said, “Now, even after paying for what we spent on my watch, we'll still face the massive deficit we had when I took office. More importantly, the cost of Medicare, Medicaid, and Social Security will continue to skyrocket.  That's why I've called for a bipartisan fiscal commission, modeled on a proposal by Republican Judd Gregg and Democrat Kent Conrad. This can't be one of those Washington gimmicks that lets us pretend we solved a problem. The commission will have to provide a specific set of solutions by a certain deadline. Now, yesterday, the Senate blocked a bill that would have created this commission. So I'll issue an executive order that will allow us to go forward, because I refuse to pass this problem on to another generation of Americans. And when the vote comes tomorrow, the Senate should restore the pay-as-you-go law that was a big reason for why we had record surpluses in the 1990s.”
  • Today, the Senate passed an amendment to the debt ceiling bill that would establish statutory pay-as-you-go rules.
  • The President’s remarks can be accessed here.

MISCELLANEOUS GUIDANCE RELEASED YESTERDAY:
Revenue Procedure 2010-15 updates Rev. Proc. 2008-14, 2008-1, C.B. 435, and identifies circumstances under which the disclosure on a taxpayer's income tax return with respect to an item or a position is adequate for purpose of reducing the understatement of income tax under section 6662(d) of the Internal Revenue Code; (relating to the substantial understatement aspect of the accuracy-related penalty), and for the purpose of avoiding the tax return preparer penalty under section 6694(a) (relating to understatements due to unreasonable positions) with respect to income tax returns.

TAX BILLS INTRODUCED JANUARY 27TH:
H.R.4528: To amend the Internal Revenue Code of 1986 to require individuals to provide their Social Security number in order to claim the refundable portion of the child tax credit.
Sponsor: Rep Johnson, Sam [TX-3] (introduced 1/27/2010)      Cosponsors (1)

H.R.4539 : To amend the Internal Revenue Code of 1986 to modify the treatment of foreign investments in United States real property, and for other purposes.
Sponsor: Rep Crowley, Joseph [NY-7] (introduced 1/27/2010)      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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