Daily Tax Update - June 25, 2010

THIRD ATTEMPT TO PASS EXTENDERS PACKAGE FAILS: Yesterday, the Senate failed once again to obtain the 60 votes needed to obtain cloture and move forward on the extenders bill. The vote was 57-41 with 60 votes needed for passage. It is unclear when the Senate may try to take up another extenders bill. Senate Majority Leader Harry Reid said, “I think you should direct those questions to Sen. [Mitch] McConnell and the Republicans, because we've tried and tried. This was our eighth week working on this legislation.” Reid continued, “We've changed this bill dramatically with the anticipation and the hope that these conversations were on the level, and they [Republicans] were trying to work with us. But we would change something, and that wasn't quite good enough. We would change something else, and we were told ‘No, I've taken a no-tax pledge, I can't do this.'” Reid added, “It's up to them. We are ready if they have an idea of going forward with this, we're happy to work with them.” Reid said that the Senate would now turn its attention to a small business tax incentives bill.

  • Separately, the House approved a retroactive, six-month Senate-passed “doc fix” bill which had been part of the broader extenders package.

TREASURY UPDATES SECTION 1603 FREQUENTLY ASKED QUESTIONS REGARDING THE BEGINNING OF CONSTRUCTION: Today, the Treasury Department updated its Frequently Asked Questions (FAQs) section of its website. To be eligible for payments for specified energy property in lieu of tax credits under Section 1603 of the American Recovery and Reinvestment Act of 2009, construction on the property must begin in 2009 or 2010 (unless the property is placed in service in 2009 or 2010). The FAQs are generally consistent with the public comments of representatives of the Treasury Department about the interpretation of the guidance that the Treasury Department issued in July 2009 and modified in March 2010 (the “Guidance”) about the Section 1603 program. The FAQs provide a number of examples of the application of the rules relating to physical work of a significant nature and the safe harbor contained in the Guidance.

IRS OFFERS INFORMATION FOR GULF OIL SPILL VICTIMS: Today, the IRS provided guidance to individuals and businesses affected by the oil spill in the Gulf of Mexico and announced a special Gulf Coast Assistance Day on July 17.

  • IRS Commissioner Doug Shulman said, “This is a very difficult time for many people affected by the oil spill in the Gulf of Mexico. As residents of the region cope with the evolving situation, I want to assure them that the IRS will be doing everything it can to provide tax help to those who need it. We encourage anyone who has an issue with the IRS to contact us and explain their hardship, and we will work with them to find a solution. We’ll do everything we can under current law to help taxpayers.”
  • According to the IRS, “The guidance released today is based on current law, and it explains how recipients of payments from BP should treat the payments for tax purposes. According to the current law, BP payments for lost income are taxable in the same way that the wages or business income these payments are replacing would have been. The law treats compensation for lost wages or income differently for tax purposes than compensation for physical injuries or property loss, which generally are nontaxable.”
  • To help people in the Gulf Coast area dealing with tax issues, the IRS also announced a special assistance day on July 17 in seven cities. Taxpayers and tax preparers will be able to work directly with IRS employees to resolve tax issues, including specific topics related to the oil spill. The IRS will hold the Gulf Coast Assistance Day in four states: (1) Alabama: Mobile; (2) Florida: Panama City and Pensacola; (3) Louisiana: New Orleans, Houma and Baton Rouge and (4) Mississippi: Gulfport. The dates and times will be released later on the IRS website.
  • Additional information can be accessed here

H.R.5602: To amend the Internal Revenue Code of 1986 to provide for distributions from retirement plans for losses as a result of the explosion on and sinking of the mobile offshore drilling unit Deepwater Horizon, the discharge of oil in the Gulf of Mexico caused by such explosion and sinking, or the effects of such discharge on the economy in the areas affected by such discharge.
Sponsor: Rep Putnam, Adam H. [FL-12] (introduced 6/24/2010) Cosponsors (1)

S.3533: A bill to amend the Internal Revenue Code of 1986 to reinstate estate and generation-skipping taxes, and for other purposes.
Sponsor: Sen Sanders, Bernard [VT] (introduced 6/24/2010) 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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