Daily Tax Update - January 14, 2011: Ways And Means Schedules Hearing on Tax Reform

THE DAILY TAX UPDATE WILL BE PUBLISHED ON A PERIODIC BASIS UNTIL THE SENATE RETURNS ON JANUARY 25TH.

WAYS AND MEANS SCHEDULES HEARING ON TAX REFORM:  On January 20, the House Ways and Means Committee will hold the first in a series of hearings on fundamental tax reform.  According to the Committee, "The hearing will examine the economic and administrative burdens imposed by the current structure of the Federal income tax.  It will explore the cost of complexity borne by American families, the cost of a corporate tax system that is increasingly out-of-step with the rest of the world, and the broader cost to the US  economy of a tax system that fails to maximize job creation and impedes economic growth."  Witnesses have not been announced. 

  • In announcing this hearing, Committee Chairman Dave Camp said, "This hearing marks the beginning of a dialogue that the President and the Congress – both Republicans and Democrats – must have with the American people about broad-based tax reform that will allow families to thrive and employers to create jobs.  With nine out of ten families either hiring tax preparers or purchasing tax software in order to file their taxes, it is clear that the tax code is too complex, too time-consuming and too costly for our families and businesses.  We have one of the highest corporate tax rates in the world, and our small businesses are struggling with continued uncertainty about individual tax rates and new regulations.  It is this Committee’s responsibility to examine ways to reform the code so that it won’t be a continued barrier to economic growth and job creation."
  • Today, Treasury Secretary Timothy Geithner met with several corporate chief financial officers to discuss tax reform.  Additional meetings with Administration officials are expected to occur but no specifics have been announced.  On January 12, Geithner said, "As the President said before, we are going to take a look at whether we can find political support for a reform of the corporate tax code that would lower rates by broadening the base but not lose revenue on net, because we don't think it's responsible or fair to do something that does not achieve that fundamental objective."  Geithner added, "What we want to do is to make sure that we're strengthening the relative incentives for investing in the United States versus shifting investment outside of the United States.  And we don't want the tax code creating incentives to shift investment outside of the United States."  Earlier this week, a senior White House adviser said that today's meeting was an opening step in what would most likely be a long process to overhaul the tax code. 

STATE OF THE UNION SET FOR JANUARY 25:  President Obama will deliver his State of the Union address to Congress on January 25.  Tax reform is expected to be one component of the President's remarks.  The President is expected to release his Fiscal Year 2012 budget around February 14.

  • When the House returns on January 18, the first order of business is expected to be consideration of legislation (H.R. 2) to repeal the health care reform act.  Although the health care repeal bill is expected to pass the House, it is unlikely that the bill will secure the 60 votes needed to pass in the Senate.  The House is expected to begin trying to dismantle funding to implement the various provisions of the health care law. 
  • The so-called 1099 repeal bill (H.R. 4) could also be taken up by the House next week.  The bill would repeal language in the health care act that requires companies, starting in 2012, to report all goods and services transactions valued over $600 to the IRS.

MISCELLANEOUS GUIDANCE RELEASED THIS WEEK:
Notice 2011-9 (released today) modifies and supersedes Notice 2010-71, which provided guidance on the annual fee imposed by section 9008 of the Affordable Care Act on manufacturers and importers of branded prescription drugs whose sales to certain government programs exceeded $5 million.  Notice 2011-9 affects five items in Notice 2010-71: (1) controlled groups; (2) orphan drugs; (3) Medicare Part D rebates; (4) Medicaid rebates; and (5) rebate reporting. 

Revenue Procedure 2011-15 (released January 13) modifies and supersedes Rev.  Proc. 83-23, 1983-1 C.B.  687, Rev. Proc. 94-17, 1994-1 C.B. 579, and Rev. Proc. 2003-21, 2003-1 C.B. 448, for taxable years beginning on or after January 1, 2010 to relieve from the requirement to file an annual return on Form 990, Return of Organization Exempt from Income Tax, organizations (other than private foundations and § 509(a)(3) supporting organizations) exempt from federal income tax because they are described in § 501(c) of the Internal Revenue Code (“exempt organizations”) whose annual gross receipts are normally not more than $50,000.

Revenue Procedure 2011-14 (released January 10) provides the current procedures for obtaining automatic consent for a change in method of accounting and modifies the procedures in Rev. Proc. 97-27 for requesting and obtaining non-automatic advance consent for a change in method of accounting. 

Notice 2011-7 (released January 10) provides guidance as to the corporate bond weighted average interest rate and the permissible range of interest rates specified under § 412(b)(5)(B)(ii)(II) of the Internal Revenue Code as in effect for plan years beginning before 2008.  It also provides guidance on the corporate bond monthly yield curve (and the corresponding spot segment rates), and the 24-month average segment rates under § 430(h)(2).  In addition, this notice provides guidance as to the interest rate on 30-year Treasury securities under § 417(e)(3)(A)(ii)(II) as in effect for plan years beginning before 2008, the 30-year Treasury weighted average rate under § 431(c)(6)(E)(ii)(I), and the minimum present value segment rates under § 417(e)(3)(D) as in effect for plan years beginning after 2007. 

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.

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