Daily Tax Update - August 5, 2011: Obama Signs FAA Extension Bill

FAA EXTENSION PASSED BY UNANIMOUS CONSENT IN SENATE -- OBAMA SIGNS BILL:  Today, the Senate moved by unanimous consent to approve the House-passed temporary FAA funding extension.  The entire Senate did not have to return to Washington for approval. The President signed the bill today.  

  • Today, the IRS posted a statement on its website that reads, "Today’s Congressional action extending the Federal Aviation Administration authorization reinstates retroactively the airline ticket taxes for passengers who traveled during the lapse of the FAA's authorization. As a result of the bill Congress passed today, passengers who purchased tickets prior to July 23 and traveled between July 23 and the date of enactment of today’s legislation are not entitled to a refund of the airline ticket excise tax. Additionally, the IRS intends to provide relief for passengers and airlines with respect to ticket taxes that were not paid or collected because of the lapse. The IRS intends to provide guidance to the airlines which will allow for an orderly restart of the collection of ticket taxes. Airlines will have from the time of enactment of the legislation through 12:01 a.m. on Monday, Aug. 8, to resume collection of the ticket taxes. The IRS is currently reviewing other effects of the legislation and will issue future guidance."      
  • Yesterday, Senate Majority Leader Harry Reid said, "I am pleased to announce that we have been able to broker a bipartisan compromise between the House and the Senate to put 74,000 transportation and construction workers back to work. This agreement does not resolve the important differences that still remain. But I believe we should keep Americans working while Congress settles its differences, and this agreement will do exactly that."         
  • The extension will keep the FAA at full operating force through September 16.   
  • For further information contact: Stanley Smilack - ssmilack@steptoe.com 

SNOWE REQUESTS THAT SENATE FINANCE COMMITTEE PREPARE RECOMMENDATIONS FOR JOINT SELECT COMMITTEE:  Senate Finance member Olympia Snowe wrote a letter to Committee Chairman Max Baucus and Ranking Member Charles Grassley this week encouraging them to hold hearings as soon as possible to prepare tax reform recommendations for the Joint Select Committee formed by the recently signed Budget Control Act of 2011.

  • Snowe's letter said, "I am writing in regard to proposals that could emerge from the newly-created Joint Select Committee in its efforts to identify deficit-reducing measures.  In particular, I am very concerned about the extent to which the Joint Select Committee may seek to include proposals on issues within our Committee's jurisdiction in its report.  As a key congressional panel, the Senate Finance Committee has the privilege and prerogative to speak clearly and forcefully on a broad range of significant fiscal- and tax-related issues.  Any such provisions considered by the Joint Select Committee should be subject to strict scrutiny by the Finance Committee and no such measures should emanate from the Joint Select Committee without thorough Finance Committee assessment."  Snowe's letter continued, "With this foremost in mind, I strongly encourage you to schedule Finance Committee action as soon as possible in order to prepare recommendations for the Joint Select Committee in accordance with the procedures set forth in the Budget Control Act of 2011.  This would allow us to provide, and the Joint Select Committee to benefit from, our unique expertise and deep experience on these issues.  Further, it will allow us to build on the hearings we have had so far this year; we have had at least eight on comprehensive tax reform alone, in addition to further hearings on deficits and revenues, and the Joint Select Committee would benefit greatly from the record we have built to this point.  I am eager to undertake these efforts with you and look forward to engaging on these issues at the earliest opportunity in order to prepare recommendations ahead of the October 14 deadline."

MISCELLANEOUS GUIDANCE RELEASED:

Notice 2011-67 (released August 4) 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.

Notice 2011-63 (released August 3) provides supplemental guidance on the determination of when State and local bonds (as defined in § 103(c)) of the Internal Revenue Code are considered "issued" for purposes of volume cap limitations on private activity bonds under § 146 and other bond volume caps and limitations under Federal law. This Notice amends and supplements Notice 2010-81, 2010-50 I.R.B. 825 (December 13, 2010) which provided guidance on when State and local bonds are considered "issued" for purposes of deadlines on issuing bonds.

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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