Daily Tax Update - December 3, 2010: Senate To Hold Saturday Tax Votes

BAUCUS MIDDLE INCOME TAX RELIEF BILL CONTAINS AMT PATCH, ESTATE TAX FIX AND EXTENDERS – SENATE TO HOLD SATURDAY VOTES: Tomorrow, the Senate will hold two votes on Democratic tax proposals. The first vote will be held on Senate Finance Committee Chairman Max Baucus’ middle income tax bill (The Middle Class Tax Cut Act of 2010), which permanently cuts taxes for middle class families making up to $250,000 and individuals making up to $200,000 per year. Baucus’ bill also contains a two-year AMT patch, estate tax relief and the extenders. The second vote will be held on a proposal by Sen. Charles Schumer (D-NY) that extends tax cuts for families making less than $1 million. Neither bill is expected to pass the Senate because Democrats need Republican support to pass a tax bill. Today, incoming House Speaker John Boehner urged Democrats to stop "wasting time with meaningless votes" and end all tax hikes.

  • Sen. Tom Harkin said that Democrats have no expectation of either proposal passing, but want to show the public “we're for the middle class and they're [Republicans] for providing tax cuts for millionaires and billionaires.” Even with the Senate vote scheduled for tomorrow, reports suggest that the tax cut negotiators are close to striking a deal that would extend all the Bush tax cuts for up to three years. The final agreement is also expected to contain an extension of unemployment benefits and the Making Work Pay tax credit.
  • Baucus’ middle income tax bill would permanently cut tax rates to 10, 15, 25, 28, and 33 percent for individuals making up to $200,000 and families making up to $250,000. The bill also contains a two-year AMT patch and reinstates the 2009 law for the estate, gift, and generation skipping transfer taxes permanently, setting the exemption at $3.5 million per person and $7 million per couple and a top tax rate of 45 percent. The exemption amount is indexed beginning in 2011. The bill also continues to treat dividends as capital gains rather than ordinary income. In addition, the bill contains the expiring tax provisions (extenders) and repeals the expansion of the corporate information reporting provision. 
  • A summary of Baucus’ bill can be accessed here.  

DEBT COMMISSION FAILS TO PASS DEFICIT PLAN: Today, the bipartisan federal debt commission (The National Commission on Fiscal Responsibility and Reform) got a majority of its 18 members to support its recommendations to reduce the nation’s debt, but failed to gain the 14 votes needed for the plan to be formally adopted and sent to Congress. Eleven members voted in support of the plan. The vote does not preclude Congress from taking up any of the recommendations, but it is very unlikely that the recommendations would be considered as a single package. Co-chairman Erskine Bowles said, “It's now up to the members of Congress and the members of the administration ... to work together.

  • Three Republicans – Rep. Paul Ryan (R-WI), Rep. Dave Camp (R-MI), and Rep. Jeb Hensarling (R-TX) along with four Democrats – Rep. Xavier Becerra (D-CA), Rep. Jan Schakowsky (D-IL) and Sen. Max Baucus (D-MT) and presidential appointee Andy Stern – voted against the plan.
  • Incoming House Ways and Means Chairman Dave Camp (R-MI), said, “Chairmen Bowles and Simpson deserve a great deal of credit for undertaking this monumental task and providing the Congress and the nation with a substantive proposal for how to tackle our debt and deficit problems, both of which we must do. Their recommendations detail the tough choices ahead; choices I am willing to make. However, I cannot support the proposal for two primary reasons. First, despite generally heading in the right direction on tax reform by broadening the base and lowering the rates, the proposal would impose higher taxes to cover higher spending. These tax increases would impede the economic growth we need to create jobs in this country. Second, the report fails to address the increased health care spending that would result from the new health care law. Health care spending is the number one driver of our debt and if we are serious about reigning in entitlement spending, the health care law must be a part of that effort. Again, I want to thank Chairmen Bowles and Simpson, as well as my fellow commission members, for their efforts and for advancing this important debate. As Chairman of the Ways and Means Committee, I intend to use the work of this Commission as the starting point for many hearings on how we tackle our debt and deficit problems while re-establishing a vibrant, job-creating economy.”
  • Senate Finance Chairman Max Baucus (D-MT) said, “Our mounting federal debt is a serious concern that we must address. I am committed to finding real solutions. That’s why I have led the charge to end wasteful subsidies to insurance companies and crack down on loopholes in our tax code that allow big corporations to hide money offshore. And at the same time, I’m fighting to help small businesses with tax cuts to grow our economy and hire new workers. But the Deficit Commission recommendations paint a big red target on rural America, and I won’t support anything that puts the debt burden on the backs of Montanans and other rural states, while others get a free pass.” Baucus added, “At the same time, the Commission recommendations do not take any aggressive steps to crack down on corporations that hide their money overseas to avoid paying their taxes. I have studied the Deficit Commission recommendations at length – and I can tell you they are wrong for Montana and wrong for rural communities across the country. Reducing our federal deficit is imperative, but we cannot cut the deficit at the expense of veterans, seniors, ranchers, farmers and hard-working families. Instead, we need to look for common-sense ways to help businesses create jobs and grow our economy. These recommendations are wrong for our state, they are wrong for our country, and I simply can’t support them.”

Notice 2010-91 provides that 3 percent withholding by government entities on payments for property or services will not apply to payments by payment card for any calendar year beginning earlier than at least 18 months from the date further guidance is finalized for section 3402(t) withholding on payments by payment card (and thus will not apply for the 2012 calendar year). Payment cards include credit cards, debit cards, stored value cards and other payment cards.

Notice 2010-89 solicits public comments on issues to be addressed in guidance implementing the new excise tax on medical devices imposed by section 4191 of the Internal Revenue Code, which applies to sales of taxable medical devices after December 31, 2012. Comments are specifically requested on the exemption in section 4191(b)(2)(D) for any medical device “determined by the Secretary to be of a type which is generally purchased by the general public at retail for individual use,” and on issues pertaining to the application of existing Chapter 32 rules to section 4191.

Revenue Procedure 2010-51 revenue procedure updates Rev. Proc. 2009-54, 2009-51 I.R.B. 930, and provides rules for using optional standard mileage rates in computing the deductible costs of operating an automobile for business, charitable, medical, or moving expense purposes.

Notice 2010-88 provides the 2011 standard mileage rates for taxpayers to use in computing the deductible costs of operating an automobile for business, charitable, medical, or moving expense purposes. This notice also provides the amount taxpayers must use in calculating reductions to basis for depreciation taken under the business standard mileage rate, and the maximum standard automobile cost that may be used in computing the allowance under a fixed and variable rate (FAVR) plan. 

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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