Daily Tax Update - December 23, 2010: Congress Adjourns Sine Die

THE DAILY TAX UPDATE WILL BE PUBLISHED ON A PERIODIC BASIS UNTIL THE 112TH CONGRESS CONVENES ON JANUARY 5TH.  

CONGRESS ADJOURNS SINE DIE: The 111th Congress officially adjourned last night and the new Congress will convene on January 5th. Outgoing House Speaker Nancy Pelosi said, "We came here to do a job. We got much of it done. It all relates to solving problems for America’s families, and we think that the agenda that we passed does just that. We’re very, very proud of it…Of course there’s always more to be done, and as long as the American people have a high unemployment rate, as families are looking for jobs, as people have uncertainty about their children’s education, about their own economic security, our work is far from over. So I look forward to working with the new majority to solve the problems for the American people."

  • At a press conference yesterday, President Obama said, "In the last few weeks, we also came together across party lines to pass a package of tax cuts and unemployment insurance that will spur jobs, businesses and growth. This package includes a payroll tax cut that means nearly every American family will get an average tax cut next year of about a thousand dollars delivered in their paychecks. It will make a difference for millions of students and parents and workers and people still looking for work. It’s led economists across the political spectrum to predict that the economy will grow faster than they originally thought next year." The President added, "So I think it’s fair to say that this has been the most productive post-election period we’ve had in decades, and it comes on the heels of the most productive two years that we’ve had in generations.... If there’s any lesson to draw from these past few weeks, it’s that we are not doomed to endless gridlock. We’ve shown, in the wake of the November elections, that we have the capacity not only to make progress, but to make progress together."
  • On the issue of extending the Bush tax cuts to high income Americans, the President said, "I still believe that it doesn’t make sense for us to provide tax cuts to people like myself who don’t need them when our deficit and debts are growing. That’s a debate that’s going to continue into 2011, and I know the Republicans feel just as strongly on the other side of that. I think that we’re still going to have disagreements in terms of spending priorities. It’s vital for us to make investments in education and research and development – all those things that create an innovative economy – while at the same time cutting those programs that just aren’t working. And there are going to be debates between the parties on those issues. But what we’ve shown is that we don’t have to agree on a hundred percent to get things done that enhance the lives of families all across America. And if we can sustain that spirit, then regardless of how the politics play out in 2012, the American people will be better for it. And that’s my ultimate goal."

MISCELLANEOUS GUIDANCE RELEASED:
In 2011, personal exemptions and standard deductions will rise and tax brackets will widen due to inflation. These inflation adjustments relate to eight tax provisions that were either modified or extended by the Tax Relief, Unemployment Insurance Reauthorization and Job Creation Act of 2010 that became law on December 17. Details on these inflation adjustments can be found here (released today).

Revenue Procedure 2011-12 (released today) provides the cost-of-living adjustments to certain items for 2011 as required under the Internal Revenue Code. The cost-of-living adjustments for 2011 for other items were previously published in Rev. Proc. 2010-40, 2010-46 I.R.B. 663 (dated November 15, 2010).

Notice 2011-1 (released December 22) addressing the timing of the application of the Patient Protection and Affordable Care Act provisions prohibiting insured group health plans from discriminating in favor of highly compensated individuals. It states that the Treasury Department and the IRS, as well as the Departments of Labor and Health and Human Services, have determined that compliance with these requirements should not be required (and thus, any sanctions for failure to comply do not apply) until after regulations or other administrative guidance of general applicability has been issued. The notice includes a request for public comments. This notice will be in Internal Revenue Bulletin 2011-2, dated Jan. 10, 2011.

Notice 2011-2 (released December 22) provides guidance on the application of section 162(m)(6) of the Internal Revenue Code (Code). Section 162(m)(6) limits the allowable deduction for remuneration for services provided by individuals to certain health insurance providers. Section 162(m)(6) was added to the Code by section 9014 of the Patient Protection and Affordable Care Act (Public Law 111-148, 124 Stat. 119, 868 (2010)). This notice will be in Internal Revenue Bulletin 2011-2, dated Jan. 10, 2011.

Revenue Ruling 2011-2 (released December 22) provides various prescribed rates for federal income tax purposes including the applicable federal interest rates, the adjusted applicable federal interest rates, the adjusted federal long-term rate, the adjusted federal long-term tax-exempt rate. These rates are determined as prescribed by § 1274. The rates are published monthly for purposes of sections 42, 382, 412, 1288, 1274, 7520, 7872, and various other sections of the Internal Revenue Code.

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.

STEPTOE & JOHNSON LLP - TAX PRACTICE
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.