Daily Tax Update - February 26, 2010

TREASURY RELEASES REVISED RULES ON TAXPAYERS REQUIRED TO REPORT FOREIGN BANK ACCOUNTS: Treasury's Financial Crimes Enforcement Network (FinCEN) has proposed to revise the regulations implementing the Bank Secrecy Act (BSA) regarding reports of foreign financial accounts. The proposed rule would clarify which persons will be required to file reports of foreign financial accounts and which accounts will be reportable. In addition, the proposed rule would exempt certain persons with signature or other authority over foreign financial accounts from filing reports and would include provisions intended to prevent United States persons from avoiding this reporting requirement. 

  • In late 2008 the IRS modified the form for reporting foreign bank accounts and the instructions for the form. The revised instructions raised questions as to who was required to file. In response to many questions and comments, the IRS published guidance, Announcement 2009-51, generally providing that one could rely on definitions in the prior version of the form and extending filing deadline for the 2008 and earlier calendar years for certain filers. In Notice 2009-62, the IRS further extended the filing deadline for certain persons and requested comments on a number of issues. 
  • The proposed rules include a new definition of a “United States person,” described as a citizen or resident of the United States (generally as determined under the income tax rules), or an entity, including but not limited to a corporation, partnership, trust or limited liability company, created, organized or formed under the laws of the United States, any state, the District of Columbia, the territories and insular possessions of the United States, or the Indian tribes.   
  • While the proposed rule would require reports with respect to accounts that are insurance policies with a cash value or annuities and with respect to mutual funds which issue shares available to the general public that have regular net asset values and redemptions, the proposed rule reserves with respect to the treatment of other types of pooled investment companies such as private equity funds, venture capital funds and hedge funds. Written comments are due within the next 60 days.
  • The regulations can be accessed here.
  • Today, the IRS also issued additional guidance on FBAR. 

Announcement 2010-16 suspends, for persons who are not United States citizens, United States residents or domestic entities the requirement to file Form TD F 90-22.1, Report of Foreign Bank and Financial Accounts (FBAR), for the 2009 and earlier calendar years.

Notice 2010-23 provides that (1) persons with signature authority over, but no financial interest in, a foreign account for which an FBAR would otherwise be due on June 30, 2010, will have until June 30, 2011, to report those accounts and (2) the IRS will not interpret the term "commingled fund" as applying to funds other than mutual funds with respect to FBAR reporting for calendar years 2009 and earlier. This latter provision would exclude foreign hedge funds and private equity funds from the definition of "commingled fund" for 2009 or earlier years.

HOUSE ETHICS PANEL ADMONISHES RANGEL: Yesterday, the House Committee on Standards of Official Conduct (Ethics Committee) found that House Ways and Means Committee Chairman Charles Rangel and five other House Members violated a House gift rule by accepting trips to conferences in the Caribbean in 2007 and 2008 that were paid for by corporations. The Committee’s statement said, “Although the Committee had approved the Members' travel, that approval was conditional upon the information provided to the Committee being true and correct. That was not the case. Since the Members were provided false information by others, and relied upon that information in seeking approval to accept the trips, the Committee concludes that the Members committed no wrongdoing. Nevertheless, since the Members did, in fact, receive impermissible gifts of travel, they must repay the costs of their trips to the respective entities that paid for their travel. Because some portions of transportation costs were paid by Carib News out of funds the actual source of which could not be determined, the Committee will require those funds to be paid to the US Treasury.”

  • “The Report further finds that Representative Charles B. Rangel violated the House gift rule by accepting payment or reimbursement for travel to the 2007 and 2008 conferences. The evidence shows that members of Representative Rangel's staff knew that corporations had contributed funds to Carib News specifically for the 2007 and 2008 conferences. This information was not provided to the Standards Committee when he sought and received approval from the Committee to accept these trips. The Committee does not find sufficient evidence to conclude, nor does it believe that it would discover additional evidence to alter its conclusion, that Representative Rangel had actual knowledge of the memoranda written by his staff.  However, the report finds that Representative Rangel was responsible for the knowledge and actions of his staff in the performance of their official duties. It is the intention of the Committee that publication of this Report will serve as a public admonishment by the Standards Committee of Representative Rangel.”
  • In a press conference yesterday, Rangel said, “I don’t want to be critical of the committee, but common sense dictates that Members of Congress should not be held responsible for what could be the wrongdoing or mistakes or errors of staff unless there’s reason to believe that the Member knew or should have known, and there’s nothing in the record to indicate the latter.” Furthermore, Rangel called the Ethics Committee's ruling "disturbing." Rangel added, “We were approved. The trip was approved. Whether it should have been approved is a serious issue. Now what information they had that I should have had, that's another matter." Rangel said that one of those aides has now been "discharged" but he didn't specify the name of either employee.
  • House Minority Leader John Boehner said, “He should step aside until all of this stuff in the ethics committee is resolved.”
  • Today, House Speaker Nancy Pelosi commented on the Ethics Committee's findings. Pelosi said, "He did not violate the rules of the House. That’s an important statement that they made. There’s more to Mr. Rangel’s situation, and we still have to hear from the ethics committee on that."

TAX BILLS INTRODUCED FEBRUARY 25th:

H.R.4693: To amend the Internal Revenue Code of 1986 to allow a credit against income tax for amounts paid by a spouse of a member of the Armed Forces for a new State license or certification required by reason of a permanent change in the duty station of such member to another State.
Sponsor: Rep Dahlkemper, Kathleen A. [PA-3] (introduced 2/25/2010) Cosponsors (10) 

H.R.4697: To amend the Internal Revenue Code of 1986 to exclude from gross income remediation payments for hazardous drywall.
Sponsor: Rep Cao, Anh "Joseph" [LA-2] (introduced 2/25/2010) Cosponsors (4)

H.R.4699: To amend the Internal Revenue Code of 1986 to extend the deduction for qualified motor vehicle taxes for motor homes.
Sponsor: Rep Donnelly, Joe [IN-2] (introduced 2/25/2010) Cosponsors (None)

H.R.4701: To amend the Internal Revenue Code of 1986 to provide relief to certain married couples who would otherwise be ineligible for the first-time homebuyer credit.
Sponsor: Rep Engel, Eliot L. [NY-17] (introduced 2/25/2010) Cosponsors (None)

H.R.4702: To amend the Internal Revenue Code of 1986 to allow all taxpayers a credit against income tax for up to $1,000 of charitable contributions.
Sponsor: Rep Forbes, J. Randy [VA-4] (introduced 2/25/2010) Cosponsors (None)

H.R.4706: To amend the Internal Revenue Code of 1986 to provide a refundable credit against income tax to assist individuals with high residential energy costs.
Sponsor: Rep Owens, William L. [NY-23] (introduced 2/25/2010) Cosponsors (None)

S.3044: A bill to amend the Internal Revenue Code of 1986 to extend the deduction for qualified motor vehicle taxes for motor homes.
Sponsor: Sen Bayh, Evan [IN] (introduced 2/25/2010) Cosponsors (None)

S.3047: A bill to terminate the Internal Revenue Code of 1986, and for other purposes.
Sponsor: Sen Isakson, Johnny [GA] (introduced 2/25/2010) Cosponsors (5)

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.

Learn more about the members of the tax practice group.