Daily Tax Update - December 7, 2010: White House Seeks Votes For Tax Cut Deal

WHITE HOUSE SEEKS VOTES FOR TAX CUT DEAL – RELEASES FACT SHEET ON AGREEMENT: Today, Vice President Joe Biden visited Capitol Hill in the hope of winning Democratic support for the Administration’s tax cut "framework" announced last night. The President held a press conference this afternoon stating that this plan was the only option that could get through the Senate. The President said that the plan was a "good deal" and said his "Number 1 priority is to do what's right for the American people."  However, the President added that he is "as opposed to the high-end tax cuts today as I've been for years" and will fight to phase them out in two years.

  • Several Democrats have already expressed their dissatisfaction with Obama’s tax cut plan. Last night, Sen. Sherrod Brown (D-OH) said, "I'm not at all happy with this. I want to see all the details before I make some kind of commitment." Brown added, "I don't know if he (President Obama) caved (to Republicans). I think he could have gotten a better agreement." Last night, a spokesman for Senate Majority Leader Harry Reid called Reid’s reaction to the plan "tepid" and said, "Now that the President has outlined his proposal, Senator Reid plans on discussing it with his caucus tomorrow." Sen. Tom Harkin (D-IA) called the plan "a moral outrage," when describing the deal that gives tax cuts to high income earners in exchange for extending unemployment benefits.
  • Senate Finance Chairman Max Baucus said the plan would have to undergo changes to gain his support. Baucus said, "It's not finished yet. There are other provisions we have to work out. One thing I've learned is nothing is over until it's all over. Let's see what's in there." Senate Minority Leader Mitch McConnell (R-KY) predicted the "vast majority" of Senate Republicans would support the plan.
  • Rep. Chris Van Hollen (D-MD) said, "House Democrats have not signed off on this deal. We'll be meeting with our caucus later today to discuss it. I have some serious reservations about parts of this deal. I understand the importance of getting to an understanding, but there are certain elements that I think are gong to cause great concern to members of our caucus." House Speaker Nancy Pelosi said, "The Republican demands would provide tax cuts to the millionaires and billionaires, fail to create jobs and increase the deficit. And to add insult to injury, the Republican estate tax proposal would help only 39,000 of America’s richest families, while adding about $25 billion more to the deficit."
  • Meanwhile, incoming House Speaker John Boehner (R-OH) said, "It’s encouraging that the White House is now willing to stop all of the job-killing tax hikes scheduled for January."

According to an overview of the White House fact sheet released today, the plan:

  • Extends the 2001/2003 Income-Tax Rates for Two Years. The framework agreement includes a mutually agreed upon solution to the impasse over taxes by extending the 2001/2003 income tax rates for two years and reforming the AMT to ensure that an additional 21 million households will not be hit with a tax increase.
  • Contains Additional Provisions Designed to Promote Vigorous Economic Growth. The Administration secured several provisions aimed at economic growth, which would not have been possible without this framework agreement: $56 billion in unemployment insurance, about $120 billion payroll tax cut for working families, about $40 billion in tax cuts for our hardest hit families and students; and 100% expensing for businesses next year. Specific provisions include:
    • 2% employee-side payroll tax cut for over 155 million workers.
    • Temporarily allowing businesses to expense all of their investments in 2011, and a 2-year extension of the R&D tax credit and other tax incentives to support business expansion.
    • An extension of the child tax credit, the Earned Income tax credit and the American Opportunity tax credit.
  • The plan sets the estate tax at 35% for two years, with a $5 million exemption on assets.
  • Reports indicate that the plan also contains the extenders, although no details have been released yet.
  • The fact sheet can be accessed here.
  • The President's remarks can be accessed here

TREASURY, IRS RELEASE 2010-2011 PRIORITY GUIDANCE PLAN: Today, the Treasury Department and the IRS released the Priority Guidance Plan for the 12-month period from July 2010 through June 2011. The plan lists 310 projects that are priorities for allocation of IRS and Treasury resources.

  • Treasury Assistant Secretary for Tax Policy Michael Mundaca, IRS Commissioner Douglas Shulman, and IRS Chief Counsel William Wilkins’ joint statement said, "This year's plan will address a variety of issues, including recent legislation, the current economic environment, and important international issues." Treasury and IRS also said that they "intend to update and republish the Priority Guidance Plan during the plan year to reflect additional items that have become priorities during the plan year and guidance that we have published."
  • The document can be accessed here

Revenue Ruling 2010-31 provides the rates for interest on tax overpayments and underpayments for the calendar quarter beginning January 1, 2011. The interest rates will be 3 percent for overpayments (2 percent in the case of a corporation), 3 percent for underpayments, 0 and one-half percent for the portion of a corporate overpayment exceeding 10,000, and 5 percent for large corporate underpayments. This quarterly determination is required by section 6621 of the Internal Revenue Code.

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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