Daily Tax Update - July 7, 2011: Boehner: Comprehensive Tax Reform "Under Discussion" - Deficit Talks To Resume Sunday

BOEHNER:  COMPREHENSIVE TAX REFORM "UNDER DISCUSSION" - DEFICIT REDUCTION TALKS TO RESUME SUNDAY:  House Speaker John Boehner said today that comprehensive tax reform is "under discussion," but repeated that Republicans oppose tax increases.  The President and congressional leaders met today on deficit reduction/debt ceiling issues.  Boehner said, "Everything is on the table except raising taxes on the American people."

  • Reports indicate that President Obama is seeking a deal, which could include major changes to entitlement programs and the tax code that would produce savings of $4 trillion over 10 to 12 years.  After today's meeting, President Obama said that the talks were "constructive" and "frank."  Obama also said that Democrats and Republicans are still "far apart" on a deal, but both sides agreed they need to reach an agreement before the August 2 deadline.  Obama added that "nothing is agreed to until everything is agreed to."  White House Press Secretary Jay Carney said that while there was "not a specific breakthrough," the talks were constructive and the White House still wants to see a package in the realm of $4 trillion in deficit reduction over 10 to 12 years.  Carney added, "We're in the endgame here."  The talks between President Obama and lawmakers will resume Sunday, with negotiations among staff to continue.
  • Boehner was asked if striking a deal that includes an overhaul of the tax code was possible before the August 2 deadline that the Treasury Department has set for raising the $14.3 trillion federal debt limit.  Boehner said, "We believe that comprehensive tax reform both on the corporate side and on the personal side would make America more competitive, help create jobs in our country and is something that is under discussion."  Boehner acknowledged that he has held private conversations on taxes with the President in recent weeks, but said "there is no agreement."
  • Meanwhile, Sens. Ron Wyden (D-OR) and Dan Coats (R-IN) want to include a timeline for tax reform in any deficit reduction agreement.  In a letter yesterday to President Obama, the Senators wrote, "[W]e believe it is vital that any debt-reduction plan you negotiate contain a commitment to comprehensive tax reform, and ask you to include a timeline for completing it by the end of this year.  It is not only the best move for the economy, it is the best opportunity we have to deliver tangible results for the American people."
  • The letter can be accessed here.
  • House Majority Leader Eric Cantor said yesterday that Republicans would discuss closing tax loopholes but that any deal on taxes must be revenue neutral.  Today, Cantor said that today's White House meeting signaled "the beginning of the final stage of the discussion" on deficit reduction and raising the debt ceiling.  Cantor added, "I feel that loopholes - we've said all along that preferences in the code aren't something that helps economic growth overall, but listen, we're not for anything that increases taxes.  Any discussion about loopholes must be accompanied by an offset in tax cuts."
  • Meanwhile, Sen. Charles Schumer said, "Our focus on tax loopholes seems to be putting Republicans on their heels on the issue of revenues.  But if Republicans are going to say we can only close those loopholes in a revenue-neutral way, it is like taking one step forward and then two steps back."
  • Sen. Jon Kyl said, "Trying to do that in this context then raises the question, are you trying to raise revenues, or are you trying to get a more coherent tax code?  If you're trying to do the latter, it's probably not best done in this context."  Kyl added, "If you're trying to do it to raise revenue, then that's something that obviously is not going to pass."
  • Senate Minority Leader Mitch McConnell also said any effort to "cherry pick" tax loopholes as part of the debt-ceiling talks would be "pretty challenging."

WAYS AND MEANS AND FINANCE TO HOLD JOINT HEARING ON TAX REFORM AND TAX TREATMENT OF DEBT AND EQUITY:  On July 13, the House Committee on Ways and Means and the Senate Committee on Finance will hold a joint hearing to review the tax treatment of debt and equity and to consider distinctions in the treatment of each in the context of comprehensive tax reform.  In connection with the hearing, the staff of the Joint Committee on Taxation (JCT) will release two reports that analyze the taxation of household debt and business debt.  The witness list has not been announced.

  • With regard to the joint hearing, Ways and Means Chairman Dave Camp made the following statement:  "The relative taxation of debt and equity has serious consequences for the economy and job creation, and it needs to be given careful consideration in the context of comprehensive tax reform.  With both the Ways and Means Committee and the Senate Finance Committee actively pursuing tax reform, it will be critical for Congress's two tax-writing panels to be working together closely.  I look forward to having our two committees convene this historic joint hearing - the first on a tax issue since 1940 - to receive these staff reports on this important issue."
  • Senate Finance Chairman Max Baucus said, "As part of tax reform, we must examine how we can improve our economy and create jobs, and to do so, we need to ask how to encourage businesses to invest in growth.  This hearing will look at the effects of different tax treatment of debt and equity on our economy.  We'll need to work together to simplify and improve our tax code to help businesses create jobs, which is why these joint hearings between our two committees are so important."

MISCELLANEOUS GUIDANCE RELEASED TODAY:

Notice 2011-52 describes regulatory provisions that Treasury and the IRS intend to propose regarding the community health needs assessment (CHNA) requirements applicable to charitable hospital organizations under the Patient Protection and Affordable Care Act of 2010. The notice describes how hospital organizations can document a CHNA in a written report, make the CHNA widely available to the public and adopt an implementation strategy to meet the health needs identified through the CHNA.

Notice 2011-59 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.

TAX BILLS INTRODUCED JULY 6TH:

1. [112nd] H.R.2408 : Geothermal Tax Parity Act of 2011
Sponsor: Rep Reichert, David G. [WA-8] (introduced 7/6/2011) Cosponsors (1)
Committees: House Ways and Means
Latest Major Action: 7/6/2011 Referred to House committee. Status: Referred to the House Committee on Ways and Means.

2. [112nd] H.R.2412 : Commuter Benefits Equity Act of 2011
Sponsor: Rep McGovern, James P. [MA-3] (introduced 7/6/2011) Cosponsors (23)
Committees: House Ways and Means
Latest Major Action: 7/6/2011 Referred to House committee. Status: Referred to the House Committee on Ways and Means.

3. [112nd] S.1330 : A bill to amend the Internal Revenue Code of 1986 to provide a temporary payroll increase tax credit for certain employers.
Sponsor: Sen Casey, Robert P., Jr. [PA] (introduced 7/6/2011) Cosponsors (1)
Committees: Senate Finance

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.