Daily Tax Update - February 28, 2011: Congress Working To Avert Government Shutdown; Tax Reform Hearings Also Focus Of This Week's Congressional Activity

CONGRESS WORKING TO AVERT GOVERNMENT SHUTDOWN; TAX REFORM HEARINGS ALSO FOCUS OF THIS WEEK’S CONGRESSIONAL ACTIVITY:  Congress returns today from its week-long Presidents’ Day recess.  Lawmakers are hopeful to strike an agreement on a compromise spending bill that would prevent a government shutdown later this week if Congress does not extend a continuing resolution to fund the government.  The current continuing resolution expires March 4. 

  • Republicans are proposing a compromise two-week continuing resolution that would cut  $4 billion in federal spending over that period.  Senate Minority Leader Mitch McConnell expressed support for the two-week short-term funding proposal.  McConnell said, "There is now a clear path to finishing this short-term measure before the March 4th deadline. By supporting the House bill, our friends on the other side of the aisle will have the chance to ensure that the government remains operational while we work with them to identify additional ways to shrink Washington spending this year."
  • Last week, House Speaker John Boehner said, "I am not going to move any kind of short-term CR (continuing resolution) at current levels.  When we say we’re going to cut spending, read my lips, we’re going to cut spending." 
  • A spokesman for Senate Majority Leader Harry Reid said Friday, "The plan Republicans are floating today sounds like a modified version of what Democrats were talking about. We’re glad they think it’s a good idea, but we should keep our focus on what we need to do to cut spending and keep our economy growing in the long-term.  But the ‘my way or the highway’ approach Republicans have been taking in the past only signals a desire for a government shutdown that our country can’t afford.  We hope this is a sign that they have abandoned it and will work with Democrats moving forward."
  • Tax reform hearings will occur in both the Senate and House tax-writing committees this week.  Tomorrow, the Senate Finance Committee will hold a hearing titled, "How Did We Get Here?  Changes in the Law and Tax Environment Since the Tax Reform Act of 1986."  The hearing will examine how changes since the Tax Reform Act of 1986 have affected the tax code, including the globalization of the economy, innovations in technology, advancements in the financial services industry and growth of tax planning practices, and how the tax code has and has not responded.  Five former Assistant Secretaries for Tax Policy will testify. 
  • In conjunction with the hearing, the Joint Committee on Taxation has released "Background Information On Tax Expenditure Analysis And Historical Survey Of Tax Expenditure Estimates."
  • The document can be accessed here.
  • On March 3, the House Ways and Means Subcommittee on Select Revenue Measures will hold a hearing on the "special burdens that the tax code imposes on small businesses and pass-through entities and the need for comprehensive tax reform to address these problems." 

MISCELLANEOUS GUIDANCE RELEASED TODAY:
Notice 2011-19 provides guidance regarding when securities of the employer are readily tradable on an established securities market or readily tradable on an established market for purposes of certain provisions of the Internal Revenue Code relating to employer securities held by certain qualified retirement plans.

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
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