Daily Tax Update - December 22, 2011: Payroll Tax Deal In the Works

TENTATIVE PAYROLL TAX DEAL IN THE WORKS:  Late this afternoon, there appeared to be movement in trying to break the stalemate on Capitol Hill regarding the payroll tax cut extension.  According to a Republican source, the House Republicans will offer a new two-month bill to extend the payroll tax cut, unemployment benefits and Medicare "doc fix."  According to reports, the plan then would be for the House to approve the new short-term legislation and then the Senate would take it up under unanimous consent. Reid would name conferees to negotiate the long-term extension in 2012.  If the plan passed the House and Senate, the President could get the bill by December 30th.  The aide said, "Under the terms of our agreement, a new bill that reflects the agreement in the Senate but with new language so that small businesses are protected from the costly new reporting requirements in the Senate bill. Reid will appoint conferees so we can complete a year-long extension in the coming weeks."

  • Earlier today, House Ways and Means Committee Chairman Dave Camp suggested that Republicans might accept a three-month, rather than two-month, extension of the tax cut and unemployment benefits.  Camp said that if the Senate bill had been extended "to three months and did the first quarter, we might have made sense of that."  Camp added, "If we can’t do a year, at least do a quarter, something that matches up with what employers have to report.  We're hearing from employers that not matching up with the quarterly reporting that they're required to do with the government is going to cause them a tremendous burden and difficulty – that it makes it harder to meet payroll."
  • However, Sen. Richard Durbin (D-IL), said, "Unfortunately, it takes days for us to set up a conference committee and then meet.  We can’t do this before Jan. 1, even if it was our intention to do it."
  • Earlier today, Senate Minority Leader Mitch McConnell called on the House to pass the short-term deal and the Senate to appoint conferees for the longer-term deal.  McConnell said, "There is no reason why Congress and the President cannot accomplish all of these things before the end of the year.  House Republicans sensibly want greater certainty about the duration of these provisions, while Senate Democrats want more time to negotiate the terms.  These goals are not mutually exclusive."
  • Senate Majority Leader Harry Reid said it was up to House Speaker John Boehner to make the first move and pass the Senate-passed bill.  Reid stated, "Once the House passes the Senate's bipartisan compromise to hold middle class families harmless while we work out our differences, I will be happy to restart the negotiating process to forge a year-long extension."  Reid added that it is "important that we now hear from Speaker Boehner in light of Senator McConnell's comments."

MISCELLANEOUS GUIDANCE RELEASED:

Announcement 2012-03 extending to April 2, 2012, the deadline to submit on-cycle applications for opinion and advisory letters for pre-approved defined contribution plans for the plans’ second six-year remedial amendment cycle.

Notice 2012-05 provides a safe harbor reporting method that an eligible real estate mortgage investment conduit (REMIC) may use to satisfy its reporting obligations with respect to information regarding REMIC assets that the REMIC must report  to residual interest holders.

Revenue Procedure 2012-14 sets forth a safe harbor providing the extent to which investments by a real estate investment trust (REIT) in a regular or a residual interest in certain real estate mortgage investment conduits (REMICs) are qualifying investments and generate qualifying income for REIT purposes under section 856(c).

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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