Daily Tax Update - December 19, 2011: House Rejects Senate Payroll Tax Bill

HOUSE REJECTS SENATE PAYROLL TAX CUT EXTENSION BILL:  House Republican leaders said that they will not accept the Senate-passed two-month payroll tax cut extension bill.  The Senate passed a two-month payroll tax cut extension on Saturday along with legislation to fund the government through the remainder of the fiscal year.  The Senate bill also extends increased unemployment insurance benefits and the "doc fix" postponing cuts to Medicare physician reimbursements.  The Senate bill is paid for through an increase in the fees charged by Freddie Mac and Fannie Mae to guarantee mortgage loans.

  • Once the House formally defeats the bill, which is expected tomorrow, a House-Senate conference will be convened to try to resolve the differences in the two bills.  House Speaker Boehner said today, "We expressed our reservations about what the Senate was doing.  But understand, I made perfectly clear to Sen. Reid and Sen. McConnell sometime mid-last week that I would not enter into negotiations with them until the Senate produced a bill."
  • In a statement today, Senate Majority Leader Harry Reid said that he would not reopen talks with Republicans to extend the payroll tax holiday for a full year unless House Republicans first pass a two-month payroll tax cut extension.  Reid said, "My House colleagues should be clear on what their vote means today.  If Republicans vote down the bipartisan compromise negotiated by Republican and Democratic leaders, and passed by 89 senators including 39 Republicans, their intransigence will mean that in ten days, 160 million middle class Americans will see a tax increase, over two million Americans will begin losing their unemployment benefits, and millions of senior citizens on Medicare could find it harder to receive treatment from physicians."  Reid added, "Senator McConnell and I negotiated a compromise at Speaker Boehner’s request.  I will not re-open negotiations until the House follows through and passes this agreement that was negotiated by Republican leaders, and supported by 90 percent of the Senate."
  • Boehner said yesterday, "We should not hold [the public] hostage to some two-month agreement.  We should do it for a full year like the president asked for."  Boehner added, "I believe that two months is just kicking the can down the road.  It’s time to just stop, do our work, resolve our differences and extend this for one year."
  • Sen. Richard Durbin countered, "Speaker Boehner says he does not want to 'kick the can down the road.'  His stubborn refusal to accept this bipartisan approach will endanger a tax cut and kick America’s middle class off the road."
  • Yesterday, White House communications director Dan Pfeiffer urged Congress to pass a stopgap measure.  He said that Congress "should pass the two-month extension now to avoid a devastating tax hike from hitting the middle class in just 13 days."  Pfeiffer added, "It’s time House Republicans stop playing politics and get the job done for the American people."  He added, "We can work on a one-year extension, but let’s pass this right now."
  • Regarding the extenders, Senate Finance Committee Chairman Max Baucus vowed to continue working in January to extend tax cuts for families, individuals and small businesses.  Baucus said, "We came together today to pass a package that provides much-needed relief for middle-class families and a boost for our economy by extending the payroll tax holiday and continuing assistance for the unemployed while ensuring that our seniors have access to their doctors.  We’ve been fighting to get these done and we’re going to keep fighting to extend other expiring tax cuts for families and small businesses to put more money back in their pockets and provide certainty for our economy when Congress reconvenes.  As we work together on comprehensive tax reform for the long-term, reaching a permanent agreement on expiring tax cuts right away must be our top priority."

FORM 8938 RELEASED:  The IRS has now released Form 8938 (Statement of Specified Foreign Financial Assets) and the instructions thereto.  Temporary regulations relating to specified foreign financial assets were promulgated last week.

  • The form and instructions can be accessed here and here.

MISCELLANEOUS GUIDANCE RELEASED:

Today, the IRS and Treasury issued final regulations to monitor and improve compliance with the tax return preparer due diligence requirement for the earned income credit under section 6695(g).

  • The regulations can be accessed here.

Notice 2012-06 extends and expands the transition relief provided under Rev. Rul. 2011-1, 2011-2 I.R.B. 251, and Rev. Rul. 2008-40, 2008-2 C.B. 166, for certain group trusts, certain retirement trusts that qualify under the Puerto Rico Internal Revenue Code (Puerto Rico Code) and that participate in group trusts, and certain qualified retirement plans that benefit Puerto Rico residents. This notice also provides additional time for governmental retiree benefit plans described in § 401(a)(24) of the Internal Revenue Code (Code) (§ 401(a)(24) plans) to be amended to satisfy the applicable requirements of Rev. Rul. 2011-1.

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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