Daily Tax Update - March 16, 2010

HOUSE REPUBLICANS SEEK RESOLUTION REQUIRING UP-OR-DOWN VOTE ON HEALTH BILL: House Republicans plan to introduce a resolution that would require an “up-or-down” vote in the House on the Senate-approved health care plan. Republicans strenuously oppose a strategy by the House Democrats that would allow them to “deem” the Senate bill passed without a separate vote.

  • House Majority Leader Steny Hoyer said that the “deem-and-pass” option has been used more frequently by Republicans than Democrats. Hoyer said, “We’re playing it straight.” Hoyer added that the procedure “is consistent with the rules, consistent with former practice, and, in my opinion, consistent with having Members express themselves on the Senate bill as amended by reconciliation.” Hoyer was noncommittal whether they had the 216 votes in the House yet. Hoyer said, “We're working on the votes.” Hoyer added, “The votes are close, people are concerned, it’s controversial. Every member of our Caucus wants to vote for a health care reform bill. That does not mean, by any stretch of the imagination, that every one of them will. This is a big bill with a lot of provisions, and there are obviously concerns within the framework of the bill. So in that context, we’re talking to every member and our expectation is when we bring this bill to the floor we will have the votes for it.”
  • House Minority Leader John Boehner said, “Anybody thinks they can sneak this bill through, ‘deem it,’ all these other tricks, there’s no way to hide from the biggest vote that most Members of Congress will ever cast. We have to put all the pressure we can on these wavering Democrats to make sure that this bill never, ever, ever happens.”

TREASURY REVISES GUIDANCE ON WHEN CONSTRUCTION BEGINS FOR ARRA ENERGY GRANTS: Today, the US Treasury Department Office of the Fiscal Assistant Secretary released a revised version of its guidance relating to payments for specified energy property in lieu of tax credits under the American Recovery and Reinvestment Act of 2009 ("ARRA"). The changes pertain only to the determination of when construction is deemed to have begun for purposes of qualifying for the ARRA grants.

  • The revised guidance clarifies that both on-site and off-site work may be taken into account for purposes of demonstrating that physical work of a significant nature has begun.
  • The revised guidance also makes several changes to the safe harbor on which a taxpayer-applicant may rely to treat construction as having begun.
  • As under the previous version of the guidance, a taxpayer-applicant may treat physical work of a significant nature as beginning when more than 5 percent of the total cost of the property has been paid or incurred. However, the revised guidance no longer explicitly excludes preliminary activities, such as planning or designing, securing financing, exploring, or researching, from the determination of the property's total cost. Instead, all costs included in the eligible basis of the specified energy property are taken into account in determining if the 5 percent of total cost threshold has been exceeded.  
  • The revised guidance also provides that, in the case of property manufactured, constructed, or produced for by the taxpayer-applicant by another person under a binding written contract, costs paid or incurred with respect to the property by such other person during the period before the property is provided to the applicant are treated as costs of the property that are paid or incurred when paid or incurred by such other person. Further, if the property includes both self-constructed components and components constructed under a contract, the costs relating to the self-constructed components and the costs relating to the components constructed under a contract are combined in determining if 5 percent of total costs have been exceeded.
  • The revised guidance provides that a taxpayer-applicant may elect to use the safe harbor by including in its ARRA grant application a statement indicating its intent to make such an election and a description of the costs that satisfy the safe harbor requirements.
  • For additional information, contact Stanley Smilackssmilack@steptoe.com or Andrew F. Gordonagordon@steptoe.com

IRS RELEASES LIST OF “DIRTY DOZEN” TAX SCAMS: Today, the IRS issued its 2010 “dirty dozen” list of tax scams, including schemes involving return preparer fraud, hiding income offshore and phishing.

  • “Taxpayers should be wary of anyone peddling scams that seem too good to be true,” IRS Commissioner Doug Shulman said. “The IRS fights fraud by pursuing taxpayers who hide income abroad.”
  • This year’s list includes: return preparer fraud, hiding income offshore, phishing, filing false or misleading forms, nontaxable Social Security benefits with exaggerated withholding credit, abuse of charitable organizations and deductions, frivolous arguments, abusive retirement plans, disguised corporate ownership, zero wages, misuse of trusts, and fuel tax credit scams.
  • Additional information can be accessed here

TAX BILL INTRODUCED MARCH 15TH:
H.R.4848: To amend the Internal Revenue Code of 1986 to reduce the rate of tax on corporations that make certain education contributions.
Sponsor: Rep Young, Don [AK] (introduced 3/15/2010)      Cosponsors (None)

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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