Daily Tax Update - August 2, 2011: President Signs Debt Ceiling Bill

PRESIDENT SIGNS DEBT CEILING BILL FOLLOWING CONGRESSIONAL APPROVAL:  Around noon today, the Senate passed the $2.1 trillion debt ceiling/deficit reduction bill (the Budget Control Act of 2011) by a vote of 74 to 26.  The bill would cut spending by as much as $2.4 trillion over the next decade.  President Obama signed the bill into law shortly thereafter.

  • In remarks today at the White House, President Obama said, "Congress has now approved a compromise to reduce the deficit and avert a default that would have devastated our economy.  It was a long and contentious debate.  And I want to thank the American people for keeping up the pressure on their elected officials to put politics aside and work together for the good of the country.  This compromise guarantees more than $2 trillion in deficit reduction.  It’s an important first step to ensuring that as a nation we live within our means.  Yet it also allows us to keep making key investments in things like education and research that lead to new jobs, and assures that we’re not cutting too abruptly while the economy is still fragile."  The President continued, "This is, however, just the first step.  This compromise requires that both parties work together on a larger plan to cut the deficit, which is important for the long-term health of our economy.  And since you can’t close the deficit with just spending cuts, we’ll need a balanced approach where everything is on the table.  Yes, that means making some adjustments to protect health care programs like Medicare so they’re there for future generations.  It also means reforming our tax code so that the wealthiest Americans and biggest corporations pay their fair share.  And it means getting rid of taxpayer subsidies to oil and gas companies, and tax loopholes that help billionaires pay a lower tax rate than teachers and nurses.  I’ve said it before; I will say it again:  We can’t balance the budget on the backs of the very people who have borne the biggest brunt of this recession.  We can’t make it tougher for young people to go to college, or ask seniors to pay more for health care, or ask scientists to give up on promising medical research because we couldn’t close a tax shelter for the most fortunate among us.  Everyone is going to have to chip in.  It’s only fair.  That’s the principle I’ll be fighting for during the next phase of this process."  Obama added, "And that’s why, when Congress gets back from recess, I will urge them to immediately take some steps -- bipartisan, common-sense steps -- that will make a difference; that will create a climate where businesses can hire, where folks have more money in their pockets to spend, where people who are out of work can find good jobs.  We need to begin by extending tax cuts for middle-class families so that you have more money in your paychecks next year.  If you’ve got more money in your paycheck, you’re more likely to spend it.  And that means small businesses and medium-sized businesses and large businesses will all have more customers.  That means they’ll be in a better position to hire."
  • Senate Majority Leader Harry Reid said, "[W]e're going to send legislation to the president today that will not only avert a default but make significant deficit reductions.  Is it enough?  I repeat, ‘no, not enough."
  • The House approved the bill last night by a vote of 269-161.  Sixty-six Republicans voted no, while 95 Democrats supported it and 95 voted in opposition.  House Majority Leader Eric Cantor said, "The big win here for us and for the American people is the fact that there are no tax hikes in this package."
  • House Minority Leader Nancy Pelosi said, "I’m not happy with it, but I’m proud of some of the accomplishments contained in it and that is why I am voting for it. . . . Please think of what would happen if we defaulted. . . .  I would urge you to consider voting yes, but I completely respect the hesitation that members have about this."
  • Earlier today, Treasury Secretary Timothy Geithner said that he didn’t know whether the final deal will be enough to save the nation's triple-A credit rating.  Geithner said, "It's not my judgment to make.  I think this is a good result, but a terrible process."  Geithner added, "I think confidence here was absolutely very damaged by this spectacle they've seen in Washington of a significant number of elected officials in this country threatening default.  As the world watched Congress step up to the edge of the abyss, it made them really wonder whether this place can work."  When asked if he would leave his job after the debt limit bill is finalized, Geithner replied, "I've been a little busy.  I haven't had a ton of time to think about that."
  • When asked yesterday about the impact of the debt limit agreement on tax reform, House Ways and Means Committee Chairman Dave Camp said, "I am hoping that getting this off the table gives us an opportunity to refocus on fundamental tax reform.  Tax reform should be about tax reform, not about deficit reduction."  Senate Finance Chairman Max Baucus said, "I do think it is important for us to begin tax reform this year. And it takes time.  I’d like to begin serious hearings on tax reform."  Senate Budget Committee Chairman Kent Conrad said that the "super committee" established by the debt agreement could craft a deficit deal that includes tax reform.  Conrad said, "This has the potential to get us to the grand compromise, which ultimately is going to be required."
  • The text of the bill can be accessed here.

TAX BILLS INTRODUCED AUGUST 1ST:

1. [112nd] H.R.2718 : To amend the Internal Revenue Code of 1986 to extend and expand tax relief for national disasters.
Sponsor: Rep Kind, Ron [WI-3] (introduced 8/1/2011)      Cosponsors (3)
Committees: House Ways and Means
Latest Major Action: 8/1/2011 Referred to House committee. Status: Referred to the House Committee on Ways and Means.

2. [112nd] H.R.2735 : To amend the Internal Revenue Code of 1986 to make permanent the look-through treatment of payments between related controlled foreign corporations.
Sponsor: Rep Boustany, Charles W., Jr. [LA-7] (introduced 8/1/2011)      Cosponsors (1)
Committees: House Ways and Means
Latest Major Action: 8/1/2011 Referred to House committee. Status: Referred to the House Committee on Ways and Means.

3. [112nd] H.R.2739 : To amend the Internal Revenue Code of 1986 to extend for one year the increased deduction for start-up expenditures.
Sponsor: Rep Connolly, Gerald E. "Gerry" [VA-11] (introduced 8/1/2011)      Cosponsors (None)
Committees: House Ways and Means
Latest Major Action: 8/1/2011 Referred to House committee. Status: Referred to the House Committee on Ways and Means.

4. [112nd] H.R.2740 : To amend the Internal Revenue Code of 1986 to treat certain population census tracts for which information is not available as low-income communities for purposes of the new markets tax credit.
Sponsor: Rep Costa, Jim [CA-20] (introduced 8/1/2011)      Cosponsors (2)
Committees: House Ways and Means
Latest Major Action: 8/1/2011 Referred to House committee. Status: Referred to the House Committee on Ways and Means.

5. [112nd] H.R.2742 : To amend the Internal Revenue Code of 1986 to provide tax incentives to employers for providing training programs for jobs specific to the needs of the employers.
Sponsor: Rep Fudge, Marcia L. [OH-11] (introduced 8/1/2011)      Cosponsors (None)
Committees: House Ways and Means
Latest Major Action: 8/1/2011 Referred to House committee. Status: Referred to the House Committee on Ways and Means.

6. [112nd] H.R.2746 : To amend the Employee Retirement Income Security Act of 1974, the Public Health Service Act, and the Internal Revenue Code of 1986 to require group and individual health insurance coverage and group health plans to provide for coverage of oral anticancer drugs on terms no less favorable than the coverage provided for intravenously administered anticancer medications.
Sponsor: Rep Higgins, Brian [NY-27] (introduced 8/1/2011)      Cosponsors (None)
Committees: House Energy and Commerce; House Ways and Means; House Education and the Workforce
Latest Major Action: 8/1/2011 Referred to House committee. Status: Referred to the Committee on Energy and Commerce, and in addition to the Committees on Ways and Means, and Education and the Workforce, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.

7. [112nd] H.R.2750 : To amend the Internal Revenue Code of 1986 to modify the investment tax credit for combined heat and power system property.
Sponsor: Rep Inslee, Jay [WA-1] (introduced 8/1/2011)      Cosponsors (9)
Committees: House Ways and Means
Latest Major Action: 8/1/2011 Referred to House committee. Status: Referred to the House Committee on Ways and Means.

8. [112nd] H.R.2755 : To amend the Internal Revenue Code of 1986 to provide a nonrefundable personal credit to individuals who donate certain life-saving organs.
Sponsor: Rep Kissell, Larry [NC-8] (introduced 8/1/2011)      Cosponsors (None)
Committees: House Ways and Means; House Energy and Commerce
Latest Major Action: 8/1/2011 Referred to House committee. Status: Referred to the Committee on Ways and Means, and in addition to the Committee on Energy and Commerce, for a period to be subsequently determined by the Speaker, in each case for consideration of such provisions as fall within the jurisdiction of the committee concerned.

9. [112nd] H.R.2756 : To amend the Internal Revenue Code of 1986 to waive the 10 percent penalty on distributions from qualified retirement plans for mortgage payments on qualified residences and in respect of unemployment and to increase the age at which distributions from qualified retirement plans are required to begin from 70 1/2 to 75.
Sponsor: Rep Latta, Robert E. [OH-5] (introduced 8/1/2011)      Cosponsors (None)
Committees: House Ways and Means
Latest Major Action: 8/1/2011 Referred to House committee. Status: Referred to the House Committee on Ways and Means.

10. [112nd] H.R.2780 : To amend the Internal Revenue Code of 1986 to clarify the domestic production activities deduction rules relating to allowance of deduction by United States contract manufacturers.
Sponsor: Rep Tiberi, Patrick J. [OH-12] (introduced 8/1/2011)      Cosponsors (1)
Committees: House Ways and Means
Latest Major Action: 8/1/2011 Referred to House committee. Status: Referred to the House Committee on Ways and Means.

11. [112nd] H.R.2784 : To amend the Internal Revenue Code of 1986 to encourage the deployment of highly efficient combined heat and power property, and for other purposes.
Sponsor: Rep Tonko, Paul [NY-21] (introduced 8/1/2011)      Cosponsors (2)
Committees: House Ways and Means
Latest Major Action: 8/1/2011 Referred to House committee. Status: Referred to the House Committee on Ways and Means.

12. [112nd] S.1456 : A bill to amend the Internal Revenue Code of 1986 to extend and expand tax relief for national disasters.
Sponsor: Sen Kerry, John F. [MA] (introduced 8/1/2011)      Cosponsors (1)
Committees: Senate Finance
Latest Major Action: 8/1/2011 Referred to Senate committee. Status: Read twice and referred to the Committee on 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.