Daily Tax Update - February 23, 2010

WYDEN, GREGG INTRODUCE “BIPARTISAN TAX FAIRNESS AND SIMPLIFICATION ACT OF 2010”: Today, Sens. Ron Wyden (D-OR) and Budget ranking member Judd Gregg (R-NH) introduced a comprehensive tax reform bill. According to their press release, “The "Bipartisan Tax Fairness and Simplification Act of 2010" takes a comprehensive approach to reforming the tangled web of nearly 10,000 exemptions, deductions, credits and other preferences that currently clutter the US tax code in order to create a simpler and fairer system that American workers and businesses can more easily navigate.”

  • According to the Senators, “The bill will eliminate the Alternative Minimum Tax - which raises taxes for millions of middle-class Americans - and will reduce the number of individual tax brackets from the current six to three: 15 percent, 25 percent, and 35 percent. To encourage small business growth, more than 95 percent of small businesses - those with gross annual receipts of up to $1 million - will be able to permanently expense all equipment and inventory costs in a single year. To help American corporations compete internationally, Wyden-Gregg reduces the top corporate tax rate and replaces the existing six corporate rates and eight brackets with a single flat rate of 24 percent. Currently, US corporations pay the second highest tax rate among industrialized countries. Wyden-Gregg reduces corporate tax rates approximately 30 percent-below the corporate tax rates of Canada, Germany, France, and many other US trading partners - ensuring that US domestic and multinational corporations can better compete in a global economy.”
  • Among other tax law changes, the bill will: (1) Index the interest deduction for corporate debt to disallow the part of the deduction that reflects inflation, (2) Require financial intermediaries to identify to the IRS all beneficial owners of accounts to whom they transmit income and to withhold 30 percent of that income if they do not identify those owners, (3) Require information reporting on payments to corporations, (4) Use chained CPI-U instead of the standard CPI-U to index parts of the tax code, (5) Change the exemption for interest on state and local bonds to a tax credit, (6) Apply the Medicare payroll tax to all state and local government employees, (7) Legalize, regulate and tax Internet gaming, (8) Consolidate tax credits and deductions for education expenses, (9) Modify the foreign tax credit rules applicable to large integrated oil companies, (10) Reinstitute the per country foreign tax credit, (11) Codify the “economic substance doctrine,” (12) Modify the tax treatment of travel on corporate aircraft, and (13) Disallow a portion of the benefit of the LIFO inventory method for large integrated oil companies.
  • A summary of the bill can be accessed here
  • A description of the offsets can be accessed here.

SENATE OVERCOMES PROCEDURAL HURDLE ON FIRST JOBS BILL: Last night, the Senate voted 62 to 30 to limit debate on a jobs bill that would offer a payroll tax holiday for businesses that hire unemployed workers and extend section 179 expensing limits. A final vote on the bill could occur tomorrow. Five Republicans voted in support of cloture, including newly elected Massachusetts Senator Scott Brown. Brown said, “It's not a perfect bill, but it's certainly a bill that I felt comfortable enough to vote on.” The other Republicans who voted in support of cloture were Sens. Susan Collins (Maine), Olympia Snowe (Maine), Christopher Bond (Missouri), and George Voinovich (Ohio). Democrat Ben Nelson (Nebraska) was the only Democrat to oppose cloture.

  • The bill’s key provisions include: (1) providing for a jobs payroll tax exemption that offers an exemption from Social Security payroll taxes for every worker hired in 2010 that has been unemployed for at least 60 days, as well as an additional $1,000 income tax credit for every new employee retained for 52 weeks to be taken on the employer’s 2011 income tax return, (2) extending section 179 expensing limits, (3) extending the highway trust fund; and (4) expanding Build America Bonds.
  • To pay for the jobs bill, Reid has proposed delaying implementation of a worldwide interest allocation provision already in law and levying a 30-percent withholding charge on US source payments to foreign financial institutions. The levy would apply to foreign banks, trusts, and corporations that do not agree to disclose their US account holders and owners to the IRS.

H.R.4633: 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: Rep Braley, Bruce L. [IA-1] (introduced 2/22/2010)      Cosponsors (None)

H.R.4637: To amend the Internal Revenue Code of 1986 to increase the amount allowed as a deduction for start-up expenditures, to provide a standard home office deduction, to increase the amount allowed as a deduction for meals and entertainment expenses of small businesses, and to extend bonus depreciation, and for other purposes.
Sponsor: Rep Hall, John J. [NY-19] (introduced 2/22/2010)      Cosponsors (None)

S.3014: A bill to amend the Internal Revenue Code of 1986 to allow companies to utilize existing alternative minimum tax credits to create and maintain United States jobs, and for other purposes.
Sponsor: Sen Stabenow, Debbie [MI] (introduced 2/22/2010)      Cosponsors (4) 

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.

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