Daily Tax Update - April 14, 2010

MUNDACA TESTIFIES ON ENERGY BUDGET ISSUES: Today, Treasury Assistant Secretary for Tax Policy Michael Mundaca testified before the House Ways and Means Committee on the energy proposals in the President’s Fiscal Year 2011 budget.

  • In his written statement, Mundaca highlighted several energy-related tax extenders. Mundaca said, “The Budget proposes to extend through 2011 a number of tax provisions that have either expired or are scheduled to expire before the end of 2011. The following energy incentives are included in the extension proposal:
    • Incentives for biodiesel and renewable diesel. A $1.00-per-gallon incentive for biodiesel and renewable diesel is provided as an income tax credit, an excise tax credit or a refundable payment. In addition, a $0.10-per-gallon income tax credit is available for small producers. The incentives expired at the end of 2009.
    • Incentives for alternative fuels. A $0.50-per-gallon (or gasoline gallon equivalent) excise tax credit or refundable payment is provided for alternative fuels such as liquefied hydrogen, natural gas fuels, liquefied petroleum gas, liquid fuels derived from coal, and liquid fuels derived from biomass. The incentives expired at the end of 2009 for fuels other than liquefied hydrogen. The proposed extension would not apply to black liquor.
    • Incentives for alcohol fuels. A $0.45-per-gallon income tax credit, excise tax credit, or refundable payment is available for alcohol fuels. The incentive is increased to $0.60 per gallon for alcohol other than ethanol and a $0.10-per-gallon credit is available for small producers. The incentives are scheduled to expire at the end of 2010.
    • Tax credits for alternative fuel refueling property. A 50-percent income tax credit is provided for alternative fuel (including electricity) refueling property, subject to a $50,000 cap for depreciable property and a $2,000 cap for nonbusiness property. The credit rate falls to 30 percent and the caps to $30,000 and $1,000 after 2010. The Budget proposal would delay these reductions for one year.”

TAX DAY BILL INTRODUCED: Yesterday, House Ways and Means Committee members introduced the Taxpayer Assistance Act of 2010 (Tax Day bill), which would reduce burdens on taxpayers while enhancing taxpayer protections. The House is expected to pass the bill today.

  • The bill would:
    • Eliminate the strict substantiation rules requiring individuals to keep detailed records regarding cell phones and similar equipment used for business purposes.
    • Require the IRS to pay interest on refunds related to individual income tax returns that are filed electronically if the refund is not paid within 30 days of the later of the return due date or the date the return is filed.
    • Help taxpayers enter into offer-in-compromise agreements to settle their federal tax liabilities, and increase the likelihood that some amount of tax is collected by repealing the partial payment requirement.
  • The two revenue provisions in the bill would:
    • Clarify that the penalty applicable to bad checks or money orders extends to all commercially acceptable instruments of payment (i.e., electronic payments).
    • Increase the penalties for failing to file correct returns, failing to furnish correct payee statements, and failing to comply with other information reporting requirements.
    • Rep. John Lewis, Chairman of the Ways and Means Oversight Subcommittee said, “This week, many Americans are preparing and filing their income tax returns. The Taxpayer Assistance Act of 2010 responds to taxpayer needs that have been raised in hearings before the Committee. This legislation helps taxpayers who are struggling in this economy by making it easier to enter into payment arrangements with the IRS. It also helps low-income taxpayers by improving IRS services available to them and helps small businesses and nonprofit organizations by relaxing the record keeping requirements for employer-provided cell phones. I am pleased that many of these provisions have broad, bipartisan support.”
  • Additional information can be accessed here

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.

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