Daily Tax Update - December 9, 2010: Senate Tax Cut Vote Could Occur This Weekend

SENATE TAX CUT VOTE COULD OCCUR THIS WEEKEND – HOUSE DEMOCRATIC CAUCUS VOTES AGAINST BRINGING CURRENT BILL TO FLOOR: Legislative language to the tax cut bill could be released later tonight and Senate floor consideration could occur Saturday. While many Democrats have voiced their dissatisfaction over the plan’s provisions to extend the tax cuts to high income earners as well as the estate tax provision, various Republicans have said that major changes are unlikely to occur.

  • The bill is expected to include an extension of all of the 2001 and 2003 individual income tax cuts, a two-year alternative minimum tax patch, two-year extensions of tax breaks such as the research and development tax credit, and an extension of several tax credits created to stimulate the economy under the American Recovery and Reinvestment Act.
  • Today, the House Democratic Caucus passed a nonbinding resolution against bringing up the tax cut package. Rep. Peter Defazio (D-OR) said, "The House will not take it up in its current form…We have tremendous concerns about what was given away by the White House" [to Senate Minority Leader Mitch McConnell (R-KY)]. Defazio said that the voice vote was virtually unanimous. After today’s Democratic Caucus vote, House Speaker Nancy Pelosi said, "We will continue discussions with the President and our Democratic and Republican colleagues in the days ahead to improve the proposal before it comes to the House floor for a vote. Democratic priorities remain clear: to provide a tax cut for working families, to create jobs and economic growth, to assist millions of our fellow Americans who have lost their jobs through no fault of their own, and to do this in a fiscally sound way."
  • Finance member Jon Kyl (R-AZ) said yesterday, "There is no end to the number of things people would like. This is the deal and nothing but the deal.'' Regarding the estate tax provision, Kyl said, "It's not going to be changed."
  • Many House Democrats have also voiced their opposition to the estate tax proposal. Rep. Chris Van Hollen (D-MD) said, "That did not have to be part of the deal. It was made very clear to the administration at every step of this process this was just a bridge too far. There was no reason this had to be part of the deal." When asked whether the bill could pass in its current form Van Hollen said, "I think the jury’s out...I’m not sure this bill can pass in this form in the House of Representatives."
  • Top Administration advisors continue to voice support for the plan. Senior White House economic adviser Larry Summers warned Congress yesterday that failing to pass the legislation could lead to a double-dip recession next year. Summers said, "If they don't pass this bill in the next couple weeks it will materially increase the risk that the economy would stall out and we would have a double dip." Meanwhile, Senior White House adviser David Axelrod said that "there are real consequences" for the American people if Congress fails to approve the package.
  • Today, President Obama said, "There is an important debate I think most of you are aware of on Capitol Hill that will determine, in part, whether our economy moves forward or backward. The bipartisan framework that we’ve forged on taxes will not only protect working Americans from seeing a major tax increase on January 1st; it will provide businesses incentives to invest, grow and hire. And every economist that I’ve talked to or that I’ve read over the last couple of days acknowledges that this agreement would boost economic growth in the coming years and has the potential to create millions of jobs. The average American family will start 2011 knowing that there will be more money to pay the bills each month, more money to pay for tuition, more money to raise their children. But if this framework fails, the reverse is true. Americans would see it in smaller paychecks that would have the effect of fewer jobs. So as we meet here today to talk about one important facet of our economic strategy for the future, I urge members of Congress to move forward on this essential priority."

SHULMAN : SECOND VOLUNTARY DISCLOSURE INITIATIVE FORTHCOMING: Today, IRS Commissioner Doug Shulman addressed the GWU/IRS Annual Institute on Current Issues in International Taxation. Shulman said that there will be a second Voluntary Disclosure initiative announced in the coming months. Shulman said, "During my tenure as Commissioner, I have made cracking down on offshore tax abuse a major priority. I believe our approach follows a natural course…cleaning up the abuses of the past and then mining and leveraging the data we receive to mount a greater attack on the abuse…We had approximately 15,000 voluntary disclosures from individuals who came in before the special VDP program ended last year. And since the special program closed, we have received an additional 3,000 voluntary disclosures from individuals with bank accounts from around the world." Shulman added, "Given its success, we are seriously considering another special offshore Voluntary Disclosure program. However, there will be some fundamental differences. Taxpayers will not get the same deal as those who came in under the original program. To be fair to those who came in before the deadline, the penalty – and thus the financial cost to participate – will increase. Let me say too that we expect to make the terms of any new program available to those who have already come in after October 2009 when that program expired. Stay tuned for more details as they become available."

  • In other remarks, Shulman said, "Today, I would like to talk about a different landscape…one which I believe is just as important to you and the IRS... and one which is changing too in profound and meaningful ways. I am speaking of the international tax landscape where a number of important developments affecting both individuals and some of our largest taxpayers have been playing out. This landscape has been at times a realm where some wealthy US taxpayers have tried to hide income and assets. It’s also been a confusing and shifting terrain where the IRS and some of America’s multinational corporations have been wrestling to make sense out of a complex tax code and sometimes overlapping and conflicting laws. This is difficult ground for everyone – corporations and the IRS alike. But in recent years…and especially this past year…this landscape has begun to change for both individual and corporate taxpayers." Shulman added," Over the past year, we have reorganized and refocused our effort to get to and resolve corporate tax issues – many of them international, such as transfer pricing – quicker. In the end, we all benefit from a balanced tax system that provides greater certainty, consistency and an efficient use of government and taxpayer resources."
  • On the issue of FATCA, Shulman said, "One of the most important projects we are working on in the international area right now is the implementation of FATCA – the Foreign Account Tax Compliance Act – which was enacted this year as part of the HIRE Act. This is the most important development in international information reporting in a generation, and it is a big step forward in our efforts to combat tax evasion…I believe the mere enactment of FATCA should prompt preparers and advisors to expand their due diligence regarding the opening of offshore accounts by US persons attempting to evade US tax obligations. In other words, passage of FATCA makes the world a riskier place for US taxpayers still trying to hide their money anywhere around the world. "
  • Regarding the corporate area, Shulman said, "In our overall program in the corporate area, we are working to redefine the relationship between the IRS and large corporate taxpayers. The key to the new relationship will be the ability to reduce uncertainty and protracted fighting, and instead be able to resolve issues –including international tax issues – more quickly and efficiently. The impetus for this new approach stems from the simple shared belief that at the end of the day, taxpayers and tax authorities pretty much want the same thing out of a tax system, whether it is the US, or a foreign, state, or local system. That is, a balanced tax administration system that provides:
    • Certainty regarding a taxpayer’s tax obligations sooner rather than later;
    • Consistent treatment across taxpayers; and
    • An efficient use of government and taxpayer resources by focusing on the issues and taxpayers that pose the greatest risk of tax noncompliance."
  • Shulman added, "With our mission guiding us and our responsibility clear in our minds, our goal is to ensure our large corporate taxpayers are in compliance and to keep them there with strategies that are less time and resource-intensive for the IRS and these taxpayers." Shulman concluded, "We have a multi-faceted effort underway to up our game and focus on international tax issues. We have made great progress, but there is still much work to be done. We will look forward to working with taxpayers, intermediaries, and other governments as we move forward with our international agenda."
  • Shulman's remarks can be accessed here

LEVIN CHOSEN AS RANKING WAYS AND MEANS MEMBER:  Today, Rep. Sander Levin (D-MI) was voted by the House Democratic Caucus as the top Democrat on the committee for the 112th Congress. Yesterday, the Democratic Steering Committee had voted for Rep. Richard Neal (D-MA).

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 has one of the largest and most diverse law firm tax practices in the country. The practice covers the entire spectrum of federal taxation, including representation of businesses before the Congress, Treasury and the national office of the IRS; transactional planning for domestic and multinational corporations; complex audit and controversy work for corporations and other business interests contesting IRS adjustments; litigation before the Tax Court, Court of Federal Claims, district courts, courts of appeals and the Supreme Court. The firm's tax practice also encompasses all aspects of employee benefits (ERISA), executive compensation, tax-exempt organizations and charitable giving. Steptoe has an extensive state and local tax practice, representing an array of business clients on complex sales and use tax, corporate income tax and property tax matters, both advising those clients and handling audits, administrative appeals, and litigation for them. Read more information on Steptoe's tax practice.