Daily Tax Update - February 5, 2010

SENATE JOBS BILL MAY CONTAIN TAX EXTENDERS:   Senate Finance Committee Chairman Max Baucus said that a package of expiring tax provisions may be included in the jobs bill, although he was noncommittal about the bill's exact contents. During yesterday's Senate Democratic news conference on the jobs bill, Senate Majority Leader Harry Reid said that the bill is expected to contain a job creation tax credit, extensions of unemployment insurance and benefits under the Consolidated Omnibus Budget Reconciliation Act of 1986, small business investment depreciation, extension of highway policy, and Build America Bonds. Reid added that he was hopeful to craft a bipartisan compromise that could obtain Republican support. It is unclear when the first jobs bill will be introduced.

  • Republican Senator Orrin Hatch said that a payroll creation tax credit proposal, which would give businesses a tax credit for each net new employee they hire this year, would likely be in a second jobs package, which will have to be done later along with the estate tax legislation. However, Senate Democrats have been noncommittal about when an estate tax bill would be considered.

IRS UPDATES REPORT ON FRIVOLOUS TAX ARGUMENTS:  Today, the IRS released the 2010 version of its discussion and rebuttal of many of the more common frivolous arguments made by individuals and groups that oppose compliance with federal tax laws. According to the IRS, the agency highlighted in the document about 40 new cases adjudicated in 2009. Highlights include cases involving (1) injunctions against preparers and promoters of Form 1099-Original Issue Discount schemes, which assert that people can draw on a secret or straw-man Treasury account by sending a Form 1099-OID to a creditor and the creditor can present the form to the Treasury Department and receive full payment of the debt, and (2) injunctions against preparers and promoters of false fuel tax credit schemes, which assert that taxpayers can claim the fuels tax credit even if they do not use the fuel for an off-highway business as required by section 6421.

  • In 2006, Congress increased the amount of the penalty for frivolous tax returns from $500 to $5,000.
  • The document can be accessed here.

MISCELLANEOUS GUIDANCE RELEASED TODAY:

Revenue Procedure 2010-17 provides guidance to individuals who fail to meet the eligibility requirements of section 911(d)(1) of the Internal Revenue Code because adverse conditions in a foreign country preclude the individuals from meeting those requirements. A current list of the countries for tax year 2009 and the dates those countries are subject to the section 911(d)(4) waiver is provided.

TAX BILLS INTRODUCED FEBRUARY 4th:

H.R.4599: To amend the Internal Revenue Code of 1986 to provide an elective payment for specified energy property.
Sponsor: Rep Blumenauer, Earl [OR-3] (introduced 2/4/2010) Cosponsors (9)

H.R.4605: To amend the Internal Revenue Code of 1986 to require that certain entities exempt from taxation (including business leagues and chambers of commerce) disclose sources and amounts of contributions.

H.R.4606: To amend the Internal Revenue Code of 1986 to expand the purposes for which Build America Bonds may be issued.
Sponsor: Rep Johnson, Eddie Bernice [TX-30] (introduced 2/4/2010) Cosponsors (None)

H.R.4608: To amend the Employee Retirement Income Security Act of 1974 and the Internal Revenue Code of 1986 to allow multiemployer plans to amortize losses from certain fraudulent investment schemes over a 40-year period.
Sponsor: Rep Maffei, Daniel B. [NY-25] (introduced 2/4/2010) Cosponsors (None)

H.R.4610: To amend the Internal Revenue Code of 1986 to eliminate the drawback fee on the manufacture or production of certain distilled spirits used in nonbeverage products.
Sponsor: Rep Pascrell, Bill, Jr. [NJ-8] (introduced 2/4/2010) Cosponsors (1)

S.2983: A bill to amend the Internal Revenue Code of 1986 to provide an exemption from employer social security taxes with respect to previously unemployed individuals, and to provide a credit for the retention of such individuals for at least 1 year.
Sponsor: Sen Schumer, Charles E. [NY] (introduced 2/4/2010) Cosponsors (1)

S.2985: A bill to amend the Internal Revenue Code of 1986 to establish a new Small Business Startup Savings Account.
Sponsor: Sen Pryor, Mark L. [AR] (introduced 2/4/2010) Cosponsors (None)

S.2992: A bill to amend the Internal Revenue Code of 1986 to eliminate the drawback fee on the manufacture or production of certain distilled spirits used in nonbeverage products.
Sponsor: Sen Lautenberg, Frank R. [NJ] (introduced 2/4/2010) Cosponsors (1)

S.2994: A bill to amend the Internal Revenue Code of 1986 to impose an excise tax on excessive 2009 bonuses received from certain major recipients of Federal emergency economic assistance, to limit the deduction allowable for such bonuses, and for other purposes.
Sponsor: Sen Boxer, Barbara [CA] (introduced 2/4/2010) Cosponsors (1)

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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