Daily Tax Update - June 9, 2011: Debt Ceiling Talks Resume

DEBT CEILING TALKS RESUME:  The members of the debt ceiling/deficit reduction negotiations ("Biden group") met again today to try to reach a consensus on raising the debt ceiling and spending cuts before the August 2 deadline.  Democrats oppose any cuts to entitlement programs such as Medicare, while Republicans have said that they oppose any tax increases.  Earlier this week, Sen. Jon Kyl said, "They (Democrats) want to talk about revenues, we want to talk about spending constraints."  Republicans are seeking a deal that includes as much as $2.5 trillion in budget savings in exchange for a vote to raise the debt ceiling through the end of 2012.

  • Meanwhile, two Senators from the bipartisan "Gang of Six" (now five Senators with Sen. Tom Coburn’s departure) working to develop a long-term deficit-reduction plan said yesterday that they are seeking greater savings than either President Obama or House Republicans have proposed.  Sens. Saxby Chambliss (R-GA) and Mark Warner (D-VA) said that their draft proposal aims to trim $4.7 trillion from budget deficits over 10 years. 
  • Chambliss said, "We don’t really have a final plan, so it’s difficult to say what the number is, but as we have looked at our numbers over the course of our discussions, it did appear that if we go to 10 years, we can be significantly above where the deficit commission report came down and I would hope we can.  With economic growth, we would hope the economy would be stimulated to the point where we even exceed that."  Chambliss said that the group has no timetable for unveiling its plan.
  • Yesterday, Warner said that he doesn’t believe there is a conflict of goals between his group and Biden’s group.  Warner added, "One of my concerns about the debt ceiling negotiations is that if we kind of limp through the lowest-common-denominator debt ceiling extension - what’s the minimal amount to cut to get through a short-term extension - we may have the time, the bond markets may respond okay, but I don’t know how big this window is [for greater reform]."  Warner added that "the problem with a short-term extension is, if you don’t have a long-term plan, you bump up against this again, and at what point do the markets run out of patience that we’re going to put a long-term plan together?"
  • Chambliss said that he was "optimistic" about the progress the Biden group was making but wouldn’t "hazard a guess right now" on whether they’ll be able to reach agreement before the August 2 deadline.  If the debt ceiling is not raised, Warner said, "It would be inexcusable.  We all ought to be fired if this is allowed to happen."
  • However, Chambliss added, "We’re not focused on the debt ceiling vote.  We were not focused on the [continuing resolution] vote.  We’re focused on getting a proposal that is right and moves us in the right direction, whenever that may come."

MISCELLANEOUS GUIDANCE RELEASED TODAY:

Notice 2011-35 requests comments regarding the fees under the Affordable Care Act to fund the Patient-Centered Outcomes Research Institute. The notice requests comments regarding how the fees to fund the institute should be calculated and what the fees will apply to. The guidance will also request comments regarding rules and safe harbors including a safe harbor for counting the number of dependents.

Announcement 2011-37 advises tax-exempt organizations that operate one or more hospital facilities that Part V, Section B of Schedule H, Hospitals, of the 2010 Form 990, Return of Organization Exempt From Income Tax, is optional for the 2010 tax year.

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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